10-Q: Spirits Time International Reports Continued Losses and Going Concern Uncertainty in Q3 2024

Spirits Time International reported no revenue and a net loss of $704,115 for the nine months ended September 30, 2024, raising concerns about its ability to continue as a going concern.

Summary

• Spirits Time International, Inc. reported its financial results for the quarter ended September 30, 2024.
• The company generated no revenue for both the three and nine-month periods ending September 30, 2024 and 2023.
• The company incurred a net loss of $52,906 for the three months ended September 30, 2024, compared to a loss of $43,033 for the same period in 2023.
• For the nine months ended September 30, 2024, the net loss was $704,115, significantly higher than the $147,080 loss in the same period of 2023.
• Professional fees increased substantially to $599,563 for the nine months ended September 30, 2024, compared to $47,501 in 2023, primarily due to costs associated with a merger agreement and maintaining SEC compliance.
• The company's cash balance was $524 as of September 30, 2024, with a negative working capital of $1,604,076.
• The company's auditors have expressed substantial doubt about its ability to continue as a going concern.
• The company is dependent on obtaining additional capital to fund operating losses and continue operations.
• The company has a secured promissory note in default, with the lender claiming $490,767 is owed.
• The company has no employees and relies on third-party consultants and service providers.

Sentiment

Score: 2

Explanation: The document paints a very negative picture of the company's financial health, with no revenue, significant losses, a going concern warning, and a default on a secured promissory note. The company's future is highly uncertain.

Positives

• The company issued 200,000 shares of Preferred Series A stock for services, which increased additional paid-in capital by $534,400.
• The company received $55,950 in financing activities during the nine months ended September 30, 2024.

Negatives

• The company has not generated any revenue.
• The company has incurred significant losses, with a net loss of $704,115 for the nine months ended September 30, 2024.
• The company has a negative working capital of $1,604,076.
• The company's auditors have expressed substantial doubt about its ability to continue as a going concern.
• The company is in default on a secured promissory note, with the lender claiming $490,767 is owed.
• The company has no employees and relies on third-party consultants and service providers.

Risks

• The company's ability to continue as a going concern is highly uncertain due to its lack of revenue and significant losses.
• The company is dependent on obtaining additional capital, which may not be available or may come with unfavorable terms.
• The default on the secured promissory note could lead to legal action and foreclosure on the company's assets.
• The company's internal controls over financial reporting were deemed ineffective.
• The company has no employees and relies on third-party consultants and service providers, which may impact operational efficiency.

Future Outlook

The company plans to build a portfolio of beverage brands and develop diverse distribution channels, but this is contingent on securing additional capital.

Management Comments

• Management believes that the company needs to raise significant additional capital to continue its business plan.
• Management acknowledges the substantial doubt about the company's ability to continue as a going concern.
• Management plans to obtain capital from management and significant shareholders and seek equity and/or debt financing.

Industry Context

The company is attempting to capitalize on the growing demand for premium distilled spirits and the trend of consumers seeking new and unique brands. The company is also looking to acquire other beverage brands.

Comparison to Industry Standards

• 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 related party loans and convertible notes is not typical of larger, more stable beverage companies.
• The company's financial situation is more comparable to early-stage startups in the beverage industry that are still in the development phase.
• The company's business model of acquiring brand and marketing rights is similar to some smaller beverage companies, but the lack of revenue and significant losses are a major concern.

Legal Proceedings

• The company is currently not a party to any pending legal proceedings.
• The company has been notified that Auctus Fund, LLC has claimed a default under the Promissory Note.

Related Party Transactions

• The company received loans from related parties totaling $30,950 during the nine months ended September 30, 2024.
• The company has convertible notes payable to related parties with a principal balance of $55,000.
• The company has an oral agreement to pay its sole director $500 per month for use of his personal residence as the company's office.

Stakeholder Impact

• Shareholders face a significant risk of loss due to the company's financial instability and going concern uncertainty.
• Creditors, particularly the lender of the secured promissory note, face the risk of not being repaid.
• Potential future employees and service providers face uncertainty due to the company's financial situation.

Next Steps

• The company needs to secure additional capital to fund its operations and marketing plans.
• The company needs to resolve the default on the secured promissory note with Auctus Fund, LLC.
• The company needs to continue to seek opportunities to acquire additional beverage brands.
• The company needs to improve its internal controls over financial reporting.

Key Dates

Keywords

Tequila, Beverage Industry, Going Concern, Financial Loss, Promissory Note Default, Capital Raise, Merger Agreement, SEC Filings, Liquidity, Negative Working Capital