10-K: Spirits Time International, Inc. Reports Full Year 2023 Results with Ongoing Concerns About Viability

Spirits Time International, Inc. reports its 2023 financial results, highlighting a net loss and ongoing concerns about the company's ability to continue as a going concern.

Summary

• Spirits Time International, Inc. filed its annual report on Form 10-K for the fiscal year ended December 31, 2023.
• The company reported a net loss of $472,518 for 2023, compared to a loss of $286,628 in 2022.
• The company has accumulated a deficit of $2,428,868 since its inception.
• Spirits Time International had no revenue for both 2023 and 2022.
• The company's working capital deficit was $1,434,561 as of December 31, 2023.
• The company's primary creditor has claimed a default under a promissory note.
• There is substantial doubt about the company's ability to continue as a going concern due to recurring losses and lack of ongoing operations.
• The company is seeking additional capital to fund operations and develop its business.

Sentiment

Score: 2

Explanation: The document paints a very negative picture of the company's financial health, with significant losses, no revenue, a substantial working capital deficit, and a going concern warning from the auditor. The company's future is highly uncertain, and the risk of failure is high.

Negatives

• The company has incurred significant losses since its inception.
• The company has a substantial working capital deficit.
• The company has no revenue.
• The company's primary creditor has claimed a default under a promissory note.
• The company's auditor has raised substantial doubt about its ability to continue as a going concern.
• The company has an accumulated deficit of $2,428,868.
• The company has ineffective internal controls over financial reporting due to a lack of segregation of duties.
• The company recorded an impairment loss on an intangible asset of $275,000 in 2023.

Risks

• The company's ability to continue as a going concern is uncertain due to recurring losses and lack of revenue.
• The company may not be able to obtain additional capital to fund its operations.
• The company faces significant competition in the distilled spirits industry.
• The company's primary creditor may take legal action due to the claimed default on the promissory note.
• The company's lack of operating history and limited capital position may hinder its ability to compete with larger companies.
• The company's internal controls over financial reporting are ineffective.
• The company is subject to various regulatory requirements and compliance costs.

Future Outlook

The company anticipates needing to raise additional capital to develop a marketing program and expand its business operations, but there is no assurance that it will be able to do so.

Management Comments

• Management is responsible for establishing and maintaining adequate internal control over financial reporting.
• Management has determined that the lack of segregation of duties constitutes a material weakness in internal control.
• Management plans to obtain additional capital from management and significant shareholders and seek equity and/or debt financing.
• Management cannot provide any assurances that the company will be successful in accomplishing any of its plans.

Industry Context

The company operates in the competitive distilled spirits industry, specifically focusing on the tequila market. The industry is characterized by both large, well-financed companies and smaller boutique brands. The company intends to compete on product quality, brand image, innovation, price, and service.

Comparison to Industry Standards

• The document does not provide specific financial metrics of comparable companies.
• The document mentions that top-selling tequila brands in the US include Jose Cuervo, Sauza, Patron, Don Julio, El Jimada and Hernitos, which are significantly larger and more established than Spirits Time International.
• The company's lack of revenue and significant losses are not in line with industry standards for established beverage companies.
• The company's reliance on third-party brand managers and distributors is common for smaller brands, but its financial position is a significant disadvantage compared to larger competitors.

Legal Proceedings

• The company has been notified that Auctus Fund, LLC has claimed a default under the promissory note issued in September 2018.
• There is no assurance that Auctus will not commence a legal proceeding in connection with such claimed default.

Related Party Transactions

• Related parties of the company loaned a total of $36,300 to the company in 2023.
• The balance due to related parties was $326,675 plus accrued interest of $164,819 as of December 31, 2023.
• The company has an oral agreement to pay its president $500 per month for use of his personal residence as the company's office.

Stakeholder Impact

• Shareholders face a high risk of losing their investment due to the company's financial difficulties and going concern issues.
• Employees, if any, face job insecurity due to the company's uncertain future.
• Customers and suppliers may be hesitant to engage with the company due to its financial instability.
• Creditors face a risk of not being repaid due to the company's financial distress.

Next Steps

• The company intends to build a portfolio of distilled spirit and non-alcoholic brands through distribution agreements, acquisitions, and potentially the development of its own brands.
• The company plans to build distribution for its products in the U.S. and Asia.
• The company plans to invest in innovative and effective sales and marketing campaigns.
• The company needs to secure additional funding to continue operations and implement its business strategy.

Key Dates

Keywords

Tequila, Spirits, Beverage, Distilled Spirits, Financial Results, Going Concern, Liquidity, Debt, Losses, Impairment, Promissory Note, Internal Controls