SPIRITS TIME INTERNATIONAL, INC. Annual Report Summary

SPIRITS TIME INTERNATIONAL, INC. Annual Report Summary: A Deep Dive for Investors

Considering an investment in SPIRITS TIME INTERNATIONAL, INC.? This summary cuts through the complexity of its recent SEC 10-K filing, offering a clear and concise overview of the company's current status and future prospects. It provides retail investors with the critical information needed to understand the company's position and the significant risks involved.

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Business Overview: A Shell Seeking a Business

SPIRITS TIME INTERNATIONAL, INC. operates as a non-operating "shell company." This means it conducts no active business operations, sells no products, and provides no services. Its sole purpose is to find, acquire, and integrate an operating business, thereby transforming into a new entity.

The company has a history of unsuccessful ventures:

• Oil & Gas (2005): Formed in 2005, the company initially ventured into the oil and gas sector. However, this operation ceased due to unprofitability.
• Tequila Marketing (2018): In 2018, the company changed its name and tried to enter the tequila market with the "Tequila Alebrijes" brand. It acquired the brand name and related assets by issuing 3.5 million shares of its common stock, paying $50,000 in cash, and taking on a $300,000 loan. This venture also failed commercially and was subsequently discontinued.

Currently, SPIRITS TIME INTERNATIONAL, INC. has no active business operations and focuses entirely on its acquisition strategy.

Financial Performance: No Revenue, Significant Losses

SPIRITS TIME INTERNATIONAL, INC. generates no revenue and is not profitable. Its financial health faces severe constraints:

• Net Loss: For the fiscal year ended December 31, 2023, the company reported a net loss of approximately $0.75 million.
• The company consistently reports no revenue and significant net losses, reflecting its non-operational status and ongoing costs from its search for an acquisition.

Risk Factors

Investing in SPIRITS TIME INTERNATIONAL, INC. carries substantial risks, making it a highly speculative investment:

• No Operating Business & Doubts About Continuing Operations: The company has no revenue, significant accumulated losses, and a shortfall in short-term assets to cover its short-term debts. This raises serious doubts about its ability to continue operating without successfully completing an acquisition or securing significant financing.
• History of Failed Ventures: The company's past attempts in oil & gas and tequila marketing were unsuccessful, showing a history of failed business execution.
• High Uncertainty & Speculative Nature: The company offers no guarantee it will find a suitable business to acquire or that any acquired business will succeed. The acquisition process is inherently complex, time-consuming, and extremely risky.
• Shareholder Dilution: Any future acquisition will likely require the company to issue a substantial number of new shares to the target company's owners. This would significantly dilute the ownership percentage of existing shareholders and could depress the market price of the common stock.
• Management Discretion & Potential Loss of Control: Management has broad discretion in identifying and negotiating acquisitions, potentially without requiring shareholder approval. A successful acquisition could also result in a change of control, where current shareholders may no longer hold a majority of voting shares, and the board of directors could be replaced.
• Cash Shortage Risk: With minimal cash reserves and no revenue, the company faces a high risk of not having enough cash to fund ongoing operational expenses or pursue acquisition opportunities.
• Competition for Acquisitions: The market for acquiring operating businesses is competitive. The company offers no guarantee it will find a suitable target on favorable terms, or at all.
• Regulatory Scrutiny: Shell companies often face heightened regulatory scrutiny, which can add complexity and cost to their operations and acquisition efforts.

Management Discussion and Analysis (MD&A) Highlights

Management discusses the company's status as a non-operating shell and its efforts to find and acquire a business. Because it generates no revenue, the MD&A primarily focuses on the company's cash flow and funding.

• Results of Operations: As a shell company, SPIRITS TIME INTERNATIONAL, INC. generates no operating revenue. Its financial results show general and administrative expenses for maintaining its public company status and costs from evaluating potential acquisition targets. The company consistently incurs net losses, mainly from these expenses and interest on outstanding debt.
• Liquidity and Capital Resources: The company's ability to fund operations and pursue acquisitions depends entirely on its minimal cash reserves and its capacity to raise more capital. The significant shortfall in short-term assets to cover short-term debts and minimal cash highlight a critical need for external financing. Management acknowledges serious doubts about the company's ability to continue operating without securing more funding or successfully completing a business combination. Because the BioSculpture Technology, Inc. merger agreement expired, the company must continue spending on due diligence and legal fees for new potential targets.
• Critical Accounting Estimates: Given its non-operational status, critical accounting estimates are limited. They mainly involve valuing assets and liabilities and assessing the company's ability to continue operating.

Financial Health

• Working Capital Shortfall: As of December 31, 2023, the company had a shortfall of approximately $0.8 million in working capital, meaning it lacked enough short-term assets to cover its short-term debts.
• Cash Position: The company held only about $15,000 in cash as of December 31, 2023.
• Balance Sheet: Total assets were approximately $0.2 million, while total liabilities reached $1.0 million as of December 31, 2023.
• Ability to Continue Operating: The company explicitly states that its ability to continue operating depends heavily on securing additional financing or successfully completing an acquisition.

By March 15, 2024 (the approximate filing date), the company had approximately 7.5 million common shares outstanding. Non-affiliates held common stock with an estimated market value of $2.69 million, based on a $2.30 share price.

Future Outlook

The company's only strategy is to find and acquire an operating business. This process aims to transform SPIRITS TIME INTERNATIONAL, INC. from a shell company into an active enterprise.

• Expired Merger Attempt: In 2023, the company pursued a merger with BioSculpture Technology, Inc., intending to acquire 100% of its shares. However, this merger agreement expired on December 31, 2023, without completion, forcing the company to restart its search for a suitable target.
• Broad Search Criteria: Management actively seeks acquisition targets across various industries and locations.
• Management's Role: This strategy's success depends entirely on management's ability to identify, negotiate, and successfully integrate a new business, as the company has no other operations to sustain itself.

Competitive Position

As a non-operating shell company, SPIRITS TIME INTERNATIONAL, INC. does not compete in any specific product or service market. Its competitive landscape involves two main areas:

• Competition for Acquisition Targets: The company competes with other entities, including other shell companies, private equity firms, and strategic buyers, for attractive acquisition targets. The market for finding and acquiring viable operating businesses can be highly competitive, with numerous potential acquirers vying for limited opportunities. The company's limited financial resources and lack of operational history may disadvantage it compared to better-capitalized or more experienced acquirers.
• Competition for Capital: The company also competes for capital from investors. Given its speculative nature, lack of operations, and significant risks, it must compete with many other investment opportunities to attract the necessary funding for its operations and potential acquisitions. Its ability to raise capital is crucial for its survival and future strategy.

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In summary, SPIRITS TIME INTERNATIONAL, INC. is a non-operating shell company with a history of failed ventures and a precarious financial position. Its future hinges entirely on its ability to execute a successful acquisition—a process fraught with significant uncertainties and risks for investors.