NICH.OIDNitches INC
10-Q/A: Nitches Inc. Reports Q3 2024 Results with Increased Losses and Derivative Liabilities
Sentiment:
Quarterly Report
Nitches Inc.'s Q3 2024 financial results show increased net losses and a significant rise in derivative liabilities, alongside minimal revenue.
Capital raiseThe company's future operations are dependent on external funding.Management believes that sufficient funding will be available from additional borrowings and private placements.The company acknowledges the need to raise significant additional capital immediately.
Worse than expectedThe company's net loss has significantly increased compared to the same period last year.The company's derivative liabilities have substantially increased, indicating higher financial risk.The company's revenue remains minimal, showing a lack of sales growth.
Summary
- Nitches Inc. reported a net loss of $1,595,710 for the nine months ended May 31, 2024, compared to a net loss of $423,789 for the same period in 2023.
- The company's revenue for the nine months ended May 31, 2024, was $4,830, a slight increase from $3,842 in the same period of 2023.
- Operating expenses for the nine months ended May 31, 2024, totaled $20,979, significantly lower than the $352,898 reported in the same period of 2023.
- The company's derivative liabilities increased substantially to $1,303,745 as of May 31, 2024, from $384,524 as of August 31, 2023.
- Nitches Inc. has a working capital deficit of $1,389,579 as of May 31, 2024.
- The company's total assets were $261,052, while total liabilities reached $1,579,597 as of May 31, 2024.
- The company issued 10,546 shares of common stock during the nine months ended May 31, 2024, bringing the total outstanding to 15,992 shares.
- The company has a significant accumulated deficit of $32,520,695 as of May 31, 2024.
Sentiment
Score: 3
Explanation: The document reveals significant financial challenges, including increased losses, high derivative liabilities, and minimal revenue. While there are some positive developments in terms of new product lines and market expansion, the overall financial health of the company is concerning, leading to a low sentiment score.
Positives
- Operating expenses decreased significantly to $20,979 for the nine months ended May 31, 2024, compared to $352,898 in the same period of 2023.
- The company has expanded its product offerings to include a premium aged whiskey under the Tover brand name.
- Nitches Inc. has established an Overseas Representative Office in Asia to expand its business reach.
Negatives
- The company's net loss has significantly increased to $1,595,710 for the nine months ended May 31, 2024.
- Derivative liabilities have increased substantially to $1,303,745.
- The company has a significant working capital deficit of $1,389,579.
- Revenue remains minimal at $4,830 for the nine months ended May 31, 2024.
- The company has a large accumulated deficit of $32,520,695.
- The company's total liabilities are significantly higher than its total assets.
Risks
- The company's ability to continue as a going concern is dependent on its ability to generate future profits or obtain necessary financing.
- The company has a limited operating history and a significant accumulated deficit.
- The company's reliance on external funding and its ability to execute its business plan are significant risks.
- The company's disclosure controls and procedures were deemed ineffective due to limited segregation of duties and a limited number of external board members.
- The company's significant derivative liabilities could pose a risk to its financial stability.
- The company has a substantial amount of debt, which could impact its ability to operate effectively.
Future Outlook
The company plans to shift into a diversified holding company of various lifestyle brands, focusing on growth and development. They expect to incur substantial expenditures for development, sales, and marketing. The company's future operations are dependent on external funding and its ability to execute its business plan.
Management Comments
- Management believes that sufficient funding will be available from additional borrowings and private placements to meet its business objectives.
- Management has committed to an aggressive growth plan for the Company.
- Management is required to apply its judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.
- Management and the Board of Directors are required to apply their judgment in evaluating the cost-benefit relationship of possible changes in the composition of the Board of Directors.
Industry Context
The company's shift towards lifestyle brands and partnerships with influencers and celebrities aligns with current trends in consumer marketing. The expansion into the liquor industry and the development of an overseas office in Asia indicate a move towards diversification and global reach. However, the company's financial struggles and reliance on debt financing are not uncommon for early-stage companies in competitive markets.
Comparison to Industry Standards
- Nitches Inc.'s financial performance is significantly below industry standards for established companies, particularly in terms of profitability and revenue generation.
- Compared to companies like LVMH or Nike, which have strong brand recognition and consistent revenue streams, Nitches is in a very early stage of development with minimal sales and significant losses.
- The company's reliance on convertible debt financing is a common practice for startups, but the high derivative liabilities indicate a high level of risk.
- The lack of profitability and the significant accumulated deficit are not typical for companies that have been operating for several years.
- The company's focus on influencer marketing and luxury goods is similar to some emerging brands, but the financial results are not yet comparable to successful companies in this space.
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| disclosure_controls_and_procedures | The company's disclosure controls and procedures were deemed ineffective due to limited segregation of duties. | 2024-05-31 | This deficiency may affect management's ability to determine if errors or inappropriate actions have taken place. |
| board_composition | The company has a limited number of external board members. | 2024-05-31 | This deficiency may give the impression to the investors that the board is not independent from management. |
Legal Proceedings
- The company is not currently involved in any material legal proceedings.
Related Party Transactions
- The company's CEO accrued pay and expenses of $12,000 as at August 31, 2022.
- The CEO paid certain invoices on behalf of the Company and accrued more pay, totaling $33,915, for a total of $45,931 due to the CEO at February 28, 2023.
- The $45,931 due to the CEO was repaid via the issuance of 3,333 shares of common stock on March 9, 2023.
- A loan note for $50,000 was issued to repay the balance of $16,000 due to the CEO and prepay four months salary at $8,500 per month, for a total of $34,000.
- Since March 9, 2023, the CEO has paid for expenses totaling $3,036, with this sum owed by the Company as at May 31, 2024.
Stakeholder Impact
- Shareholders are at risk due to the company's significant losses and accumulated deficit.
- Employees may be impacted by the company's financial instability and potential need for cost-cutting measures.
- Customers may be affected by the company's ability to deliver products and services.
- Suppliers and creditors face increased risk due to the company's high debt and working capital deficit.
Next Steps
- The company intends to continue to build its corporate and operational infrastructure.
- The company plans to build interest in its product and service offerings.
- The company will continue to evaluate its plan of operations to determine the most effective use of its limited cash resources.
- The company needs to raise significant additional capital immediately.
Key Dates
| Date | Description |
|---|---|
| 2020-11-05 | International Ventures Society, LLC appointed custodian of the Company. |
| 2020-11-06 | Company adopted amended Articles of Incorporation, creating Series A Preferred Stock. |
| 2020-12-16 | International Ventures Society, LLC sold Series A Preferred Stock to Accelerate Global Market Solutions, Inc., resulting in a change of control. |
| 2021-11-04 | Series A Preferred Stock converted into 1,667 shares of Common Stock. |
| 2022-02 | Company announced the launch of its Nitches OVS mobile app. |
| 2022-03 | Company agreed to issue 1 share of Series A Preferred Stock to John Morgan. |
| 2022-04-05 | Company executed amended loan notes, changing conversion terms. |
| 2022-07-21 | Company announced it had repaid all outstanding loan notes and convertible loan notes. |
| 2022-11-25 | Company announced it had ceased its involvement in the Metaverse project. |
| 2023-01-23 | One share of Series A Preferred Stock was issued to John Morgan. |
| 2023-03-09 | Company issued 3,333 shares of Common Stock to a consultant for services. |
| 2023-03-14 | Company issued 217 shares of Common Stock to an investor. |
| 2023-03-22 | Company announced an expansion into the liquor industry with the launch of Tover brand. |
| 2023-03-27 | Company issued 200 shares of Common Stock to an investor. |
| 2023-04-03 | Company issued 233 shares of Common Stock to an investor. |
| 2023-05-05 | Company issued 250 shares of Common Stock to an investor. |
| 2023-05-18 | Company announced a collaboration with the Association of Luxury Suite Directors (ALSD). |
| 2023-05-26 | Company issued 267 shares of Common Stock to an investor. |
| 2023-07-07 | Company issued 283 shares of Common Stock to an investor. |
| 2023-08-30 | Company entered into a settlement agreement with a lender to convert debt into shares. |
| 2024-01-17 | Company entered into a settlement agreement with a lender to convert debt into shares. |
| 2024-01-23 | Company announced the appointment of Mr. Nikola Cvetkovic to its advisory board. |
| 2024-02-06 | Company announced the establishment of an Overseas Representative Office in Asia. |
| 2024-02-28 | Company announced a partnership with Alamo Distillery to launch Tover Spirits. |
| 2024-03-01 | Company increased the number of authorized shares of common stock and introduced two new series of preferred stock. |
| 2024-05-31 | End of the reporting period for the quarterly report. |
| 2024-06-10 | Company executed a 1 for 60,000 reverse split of its shares of common stock. |
| 2025-01-24 | Date of the report. |
Keywords
financial results, derivative liabilities, net loss, convertible loan notes, working capital deficit, revenue, stock issuance, accumulated deficit, going concern, debt
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