10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

Form 10-Q

(Mark One)

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended

September 30, 2020.

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from

______________________ to ____________________.

Commission File Number:  333-151300

SPIRITS TIME INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Nevada	20-3455830
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1661 Lakeview Circle

Ogden, Utah 84403

(801) 399-3632

 (Registrant’s address and telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: NONE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted  pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer  o
Non-accelerated filer x	Smaller reporting company  x
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o

Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes oNo  x 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The number of shares outstanding of the issuer’s common stock, $0.001 par value (the only class of voting stock), was 7,361,005 on November 23, 2020.

1 

SPIRITS TIME INTERNATIONAL, INC.

INDEX

	Page
	Number
PART I - FINANCIAL INFORMATION	3
Item 1 – Financial Statements (Unaudited)	3
Balance Sheets (Unaudited)	F-2
Statements of Operations (Unaudited)	F-3
Statements of Stockholders’  Deficit (Unaudited)	F-4
Statements of Cash Flows (Unaudited)	F-5
Notes to Financial Statements (Unaudited)	F-6
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3 – Quantitative and Qualitative Disclosure About Market Risk	8
Item 4 – Controls and Procedures	8
PART II – OTHER INFORMATION	10
Item 1 - Legal Proceedings	10
Item 1A–Risk Factors	10
Item 2 – Unregistered Sales of  Equity Securities and Use of Proceeds	10
Item 3 - Defaults upon Senior Securities	10
Item 4 – Mine Safety Disclosures	10
Item 5 - Other Information	10
Item 6 – Exhibits	10
Signatures	11
Index to Exhibits	11

2 

PART I ― FINANCIAL INFORMATION

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  These statements are based on management’s beliefs and assumptions, and on information currently available to management.  Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider,” or similar expressions are used.

Forward-looking statements are not guarantees of future performance.  They involve risks, uncertainties, and assumptions.  Our future results and shareholder values may differ materially from those expressed in these forward-looking statements.  Readers are cautioned not to put undue reliance on any forward-looking statements.  

Item 1. – Financial Statements

As used herein, the terms “Spirits Time,” “we,” “our,” and “us” refer to Spirits Time International, Inc., a Nevada corporation, unless otherwise indicated. The unaudited financial statements of the registrant for the nine months ended September 30, 2020 and 2019 follow. The condensed financial statements reflect all adjustments that are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.  All such adjustments are of a normal and recurring nature.

3 

  SPIRITS TIME INTERNATIONAL, INC.

September 30, 2020

INDEX TO FINANCIAL STATEMENTS

(Unaudited) 

	Page(s)
Balance Sheets (Unaudited)	F-2
Statements of Operations (Unaudited)	F-3
Statements of Stockholders’  Deficit (Unaudited)	F-4
Statements of Cash Flows (Unaudited)	F-5
Notes to the Financial Statements (Unaudited)	F-6

F-1 

SPIRITS TIME INTERNATIONAL, INC.
Balance Sheets
(Unaudited)
ASSETS
			September 30,	December 31,
			2020	2019
CURRENT ASSETS
	Cash and cash equivalents		$               580	$               163
	Inventory		80,404	80,404
		Total Current Assets	80,984	80,567
OTHER ASSETS
	Intangible assets		275,000	275,000
		TOTAL ASSETS	$        355,984	$        355,567
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
	Accounts payable		$        126,096	$        112,600
	Accrued interest		97,173	34,639
	Accrued interest - related parties		71,879	52,532
	Loans payable - related parties		173,663	145,413
	Convertible notes payable - related parties		55,000	55,000
	Convertible note payable		290,000	290,000
	Notes payable		45,000	40,000
		Total Current Liabilities	858,811	730,184
		TOTAL LIABILITIES	858,811	730,184
COMMITMENTS AND CONTINGENCIES (NOTE 8)			-	-
STOCKHOLDERS' DEFICIT
	Preferred stock, $0.001 par value; 20,000,000 shares authorized
	Preferred stock designated, Series D, $0.001 par value, 50,000
	shares authorized, 5,000 shares issued and
	outstanding		5	5
	Common stock, $0.001 par value; 140,000,000 shares
	authorized, 7,361,005 shares issued and outstanding		7,361	7,361
	Additional paid-in capital		942,050	942,050
	Accumulated deficit		(1,452,243)	(1,324,033)
		Total Stockholders' Deficit	(502,827)	(374,617)
		TOTAL LIABILITIES AND STOCKHOLDERS'  DEFICIT	$        355,984	$        355,567
The accompanying notes are an integral part of these unaudited financial statements.

F-2 

SPIRITS TIME INTERNATIONAL, INC.
Statements of Operations
(Unaudited)
			For the Three Months Ended		For the Nine Months Ended
			September 30,		September 30,
			2020	2019	2020	2019
NET REVENUES			$                 -	$                 -	$                 -	$                 -
OPERATING EXPENSES
	Professional fees		8,086	34,815	40,160	102,996
	Selling, general and administrative		2,509	4,404	6,168	21,789
		Total Operating Expenses	10,595	39,219	46,328	124,785
LOSS FROM OPERATIONS			(10,595)	(39,219)	(46,328)	(124,785)
OTHER INCOME (EXPENSES)
	Interest expense		(25,701)	(21,096)	(81,882)	(62,623)
		Total Other Income (Expenses)	(25,701)	(21,096)	(81,882)	(62,623)
LOSS BEFORE INCOME TAXES			(36,296)	(60,315)	(128,210)	(187,408)
PROVISION FOR INCOME TAXES			-	-	-	-
NET LOSS			$     (36,296)	$     (60,315)	$   (128,210)	$   (187,408)
NET LOSS PER SHARE - BASIC AND DILUTED			$         (0.00)	$         (0.01)	$         (0.02)	$         (0.03)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - BASIC AND DILUTED			7,361,005	7,298,396	7,361,005	7,286,866
The accompanying notes are an integral part of these unaudited financial statements.

F-1 

SPIRITS TIME INTERNATIONAL, INC.
Statements of Stockholders' Deficit
(Unaudited)
	Nine Months Ended September 30, 2020
					Additional		Total
	Preferred Stock		Common Stock		Paid-In	Accumulated	Stockholders'
	Shares	Amount	Shares	Amount	Capital	Deficit	Deficit
Balance, December 31, 2019	5,000	$                   5	7,361,005	$             7,361	$         942,050	$     (1,324,033)	$        (374,617)
Net loss for the three months ended
March 31, 2020	-	-	-	-	-	(46,241)	(46,241)
Balance, March 31, 2020	5,000	5	7,361,005	7,361	942,050	(1,370,274)	(420,858)
Net loss for the three months ended
June 30, 2020	-	-	-	-	-	(45,673)	(45,673)
Balance, June 30, 2020	5,000	5	7,361,005	7,361	942,050	(1,415,947)	(466,531)
Net loss for the three months ended
September 30, 2020	-	-	-	-	-	(36,296)	(36,296)
Balance, September 30, 2020	5,000	$                   5	7,361,005	$             7,361	$         942,050	$     (1,452,243)	$        (502,827)
	Nine Months Ended September 30, 2019
					Additional		Total
	Preferred Stock		Common Stock		Paid-In	Accumulated	Stockholders'
	Shares	Amount	Shares	Amount	Capital	Deficit	Deficit
Balance, December 31, 2018	-	$                    -	7,281,005	$             7,281	$         684,537	$     (1,028,638)	$        (336,820)
Amortization of debt premium	-	-	-	-	74,999	-	74,999
Net loss for the three months ended
March 31, 2019	-	-	-	-	-	(56,663)	(56,663)
Balance, March 31, 2019	-	-	7,281,005	7,281	759,536	(1,085,301)	(318,484)
Amortization of debt premium	-	-	-	-	75,000	-	75,000
Net loss for the three months ended
June 30, 2019	-	-	-	-	-	(70,430)	(70,430)
Balance, June 30, 2019	-	-	7,281,005	7,281	834,536	(1,155,731)	(313,914)
Common stock issued for services	-	-	50,000	50	14,950	-	15,000
Amortization of debt premium	-	-	-	-	69,999	-	69,999
Net loss for the three months ended
September 30, 2019	-	-	-	-	-	(60,315)	(60,315)
Balance, September 30, 2019	-	$                    -	7,331,005	$             7,331	$         919,485	$     (1,216,046)	$        (289,230)
The accompanying notes are an integral part of these unaudited financial statements.

F-1 

SPIRITS TIME INTERNATIONAL, INC.
Statements of Cash Flows
(Unaudited)
			For the Nine Months Ended
			September 30,
			2020	2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss			$      (128,210)	$      (187,408)
Adjustments to reconcile net loss to net cash
used by operating activities:
	Stock based compensation		-	15,000
	Amortization of debt discount		-	17,812
Changes in operating assets and liabilities:
	Accounts payable and accrued interest		76,030	39,219
	Accrued interest - related parties		19,347	4,907
		Net Cash Used by Operating Activities	(32,833)	(110,470)
CASH FLOWS FROM INVESTING ACTIVITIES			-	-
CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from notes payable		5,000	-
	Payments on loans payable - related parties		-	(17,565)
	Proceeds from loans payable - related parties		28,250	8,000
		Net Cash Provided (Used) by Financing Activities	33,250	(9,565)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			417	(120,035)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			163	121,739
CASH AND CASH EQUIVALENTS AT END OF PERIOD			$               580	$            1,704
SUPPLEMENTAL DISCLOSURES:
	Cash paid for interest		$                   -	$          30,619
	Cash paid for income taxes		$                   -	$                   -
	Non-cash investing and financing activities:
		Amortization to additional paid-in capital of premium on
		convertible note payable	$                   -	$        219,998
The accompanying notes are an integral part of these unaudited financial statements.

F-1 

SPIRITS TIME INTERNATIONAL, INC.

Notes to the Financial Statements

September 30, 2020

(Unaudited)

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial statements at September 30, 2020 and for all periods presented have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2019 audited financial statements.  The results of operations for the period ended September 30, 2020 are not necessarily indicative of the operating results for the full year.

Loss Per Share - The computations of basic loss per share of common stock are based on the weighted average number of shares outstanding at the date of the financial statements. During the nine months ended September 30, 2020 and 2019, the Company had warrants outstanding that are exercisable into 42,857 shares of common stock, and convertible debt outstanding that is convertible into 219,383 shares of common stock.  The common stock issuable from the warrants and convertible debt was not included, as it would be anti-dilutive due to continuing losses.

Nine Months Ended	Loss (Numerator)	Shares (Denominator)	Per Share Amount
September 30, 2020	$               (128,210)	7,361,005	$             (0.02)
September 30, 2019	$              (187,408)	7,286,866	$             (0.03)

Inventory - Inventory consists of bottled tequila acquired in the acquisition of the Tequila Alebrijes products and intangibles and is held by a third-party tequila production warehouse in Tequila Jalisco, Mexico. Inventory is stated at lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method. As of September 30, 2020 and December 31, 2019, the Company had finished goods bottled tequila inventory on-hand totaling $80,404 and $80,404, respectively. The Company has determined that no reserve for obsolete or slow-moving inventory is necessary as of September 30, 2020 or December 31, 2019.

NOTE 2 – INTANGIBLE ASSETS

Intangible assets consists of the Tequila Alebrijes brand name, trademark, and property rights.  The Company has determined that no impairment of intangible assets is necessary as of September 30, 2020 or December 31, 2019.

NOTE 3 - GOING CONCERN

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has had no revenues and has generated losses from operations. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs, which raises substantial doubt about its ability to continue as a going concern. The continuance of the Company as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations.

F-1 

SPIRITS TIME INTERNATIONAL, INC.

Notes to the Financial Statements

September 30, 2020

(Unaudited)

In addition, the extent of the impact of the coronavirus ("COVID‐19") outbreak on the financial performance of the Company will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions, and the impact of COVID‐19 on the overall economy, all of which are highly uncertain and cannot be predicted. If the overall economy is impacted for an extended period, the Company’s future operating results may be materially adversely affected.

The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 4 – RELATED PARTY LOANS AND OTHER TRANSACTIONS

During the nine months ended September 30, 2020 and 2019, the Company received loans in the amount of $28,250 and $8,000, respectively, from related parties of the Company.  These loans accrue interest at the rate of 12% per annum, are due on demand and are not convertible into common stock of the Company.  The balances due on non-convertible loans payable to related parties were principal of $173,663 and $145,413 plus accrued interest of $38,857 and $24,451 as of September 30, 2020 and December 31, 2019, respectively.  

Beginning August 2017, the Company entered into an oral agreement to pay the Company’s sole director $500 per month as payment for use of his personal residence as the Company’s office and mailing address.  The Company has recorded rent expense of $4,500 during the nine months ended September 30, 2020 and 2019 which is included in the selling, general and administrative expenses on the statements of operations.

On October 29, 2018, we entered into a non-exclusive Brand Management Agreement (“Brand Management Agreement”) with CapCity Beverage, LLC (“CCB”) for the brand Tequila Alebrijes (“Brand”).  CCB is a wholly-owned subsidiary of HBI, which currently owns approximately 44% of our common stock.  A copy of the Brand Management Agreement was attached as an Exhibit to a Form 8-K filed by the Company with the SEC on November 1, 2018.  See Note 7 for details.

In March 2014, the Company issued a $40,000 convertible promissory note to the sole officer and director of the Company and a $15,000 convertible promissory note to another affiliated shareholder (the “Convertible Notes”). The Convertible Notes had a term of one year expiring March 2015, and are now payable on demand, and accrue interest at the rate of 12% per annum. The holders of the Convertible Notes, may, at their option, convert all or any portion of the outstanding principal balance of, and all accrued interest on the Convertible Notes into shares of the Company’s common stock, par value $0.001 per share, at a conversion rate of $1.00 per share.  During the year ended December 31, 2019, $10,000 of accrued interest was converted into 5,000 shares of Preferred Stock valued at $228, resulting in a $9,772 gain being recorded as forgiveness of related party debt in additional paid-in capital (Note 8).  No principal or interest has been paid on these Notes.  As of September 30, 2020 and December 31, 2019, the balance due to these related parties for these Notes was principal of $55,000 and $55,000, respectively, and accrued interest of $33,022 and $28,081, respectively.  

F-2 

SPIRITS TIME INTERNATIONAL, INC.

Notes to the Financial Statements

September 30, 2020

(Unaudited)

Convertible notes and loans payable – related parties consisted of the following:

	September 30, 2020	December 31, 2019
Loans payable to related parties, interest at 12%  per annum, due on demand	173,663	145,413
Convertible notes payable to related parties, interest at 12% per annum, due on March 7, 2015 (in default), convertible into common stock at $1.00 per share	55,000	55,000
Total Convertible Notes and Loans Payable – Related Parties	228,663	200,413
Less: Current Portion	(228,663)	(200,413)
Long-Term Convertible Notes and Loans Payable – Related Parties	$  -	$    -

Accrued interest on the convertible notes and loans payable, related parties was $71,879 and $52,532 at September 30, 2020 and December 31, 2019, respectively.  The Company did not record beneficial conversion feature elements on the related party convertible debt due to the conversion rate of $1.00 per share being greater than the fair market value of the underlying shares on the date of issuance.

NOTE 5 – CONVERTIBLE PROMISSORY NOTES / NON-RELATED PARTIES

The Company has a collateralized convertible debt obligation with Auctus Fund, LLC, an unaffiliated entity, outstanding at September 30, 2020 and December 31, 2019 as follows:

Note (A)	Principal(1)	Less Debt Discount	Plus Premium	Net Note Balance	Accrued Interest
September 30, 2020	$         290,000	$                    -	$                 -	$         290,000	$      89,723
December 31, 2019	$         290,000	$                    -	$                 -	$         290,000	$      31,023

(1)Collateralized by the Company’s assets, including accounts receivable, cash and equivalents, inventory, property, equipment, intangibles.  At September 30, 2020 and December 31, 2019, the Company’s assets consisted of cash and equivalents of $580 and $163, respectively, inventory of $80,404, and intangible assets of $275,000, for total carrying value of $355,984 and $355,567, respectively. 

(A)On September 24, 2018 (the “Date of Issuance”) the Company issued a convertible promissory note (the “Note”) with a face value of $300,000, maturing on September 24, 2019, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 1 month of the funding of the note into a variable number of the Company's common stock, based on a conversion rate of 50% of the lowest trading price for the 25 days prior to conversion. The note was funded on September 28, 2018, when the Company received proceeds of $276,250, after disbursements for the lender's transaction costs, fees and expenses which in aggregate resulted in a total discount of $23,750 to be amortized to interest expense over the life of the note. Additionally, the note’s variable conversion rate component requires that the note be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note’s undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note. As such, the Company recorded a premium on the note of $299,998 as a reduction to additional paid-in capital based on  

F-3 

SPIRITS TIME INTERNATIONAL, INC.

Notes to the Financial Statements

September 30, 2020

(Unaudited)

a discounted “if-converted” rate of $1.825 per share (50% of the lowest trading price during the 25 days preceding the note's issuance), which computed to 164,383 shares of 'if-converted' common stock with a redemption value of $599,998 due to $3.65 per share fair market value of the Company's stock on the note's date of issuance. Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital. During the nine months ended September 30, 2019, the Company recorded discount and premium amortization of $17,812 and $219,998, respectively.  The premium and discount were fully amortized at December 31, 2019.  This note is currently in default (Note 7).

Along with the Note, on the Date of Issuance the Company issued 42,857 Common Stock Purchase Warrants (the “Warrants”), exercisable immediately at a fixed exercise price of $3.50 with an expiration date of September 24, 2023.  The Company has determined that the Warrants are exempt from derivative accounting and were valued at $86,750 on the Date of Inception using the Black Scholes Options Pricing Model.  Assumptions used for the Black Scholes Options Pricing Model include (1) stock price of $3.65 per share, (2) exercise price of $3.50 per share, (3) term of 5 years, (4) expected volatility of 3.87% and (5) risk free interest rate of 2.96%.  The note proceeds of $300,000 were then allocated between the fair value of the promissory note ($300,000) and the Warrants ($86,750), resulting in a debt discount of $67,292.  As the warrants are exercisable immediately, this debt discount was amortized in its entirety to interest expense on the Date of Issuance.

During the year ended December 31, 2019, the Company paid $10,000 towards principal on the Note, and $12,350 of accrued interest and $250 in conversion fees ($12,600 total) was converted into 30,000 shares of common stock.

NOTE 6 – NOTES PAYABLE

Notes payable consisted of the following:

	September 30, 2020	December 31, 2019
Note payable to an individual, interest at 12% per annum, issued August 1, 2018 due November 15, 2018 (in default), unsecured	$           10,000	$             10,000
Note payable to an individual, interest at 12% per annum, issued December 31, 2018 due December 31, 2019 (in default), unsecured	30,000	30,000
Note payable to an individual, interest at 12% per annum, issued May 1, 2020 due May 1, 2021, unsecured	5,000	-
Total Notes Payable	45,000	40,000
Less: Current Portion	(45,000)	(40,000)
Long-Term Notes Payable	$                     -	$                       -

Accrued interest and interest expense for these Notes as of and for the year ended December 31, 2019 totaled $3,616 and $4,800, respectively.  During the year ended December 31, 2019, interest in the amount of $1,683 was paid. Accrued interest and interest expense for these Notes as of and for the nine months ended September 30, 2020 totaled $7,450 and $3,833, respectively.    

F-4 

SPIRITS TIME INTERNATIONAL, INC.

Notes to the Financial Statements

September 30, 2020

(Unaudited)

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Brand Management Agreement

On October 29, 2018, the Company entered into a non-exclusive brand management agreement (“Brand Management Agreement”) with CapCity Beverage, LLC, (“CCB”), a wholly-owned subsidiary of Human Brands International, Inc. (a significant shareholder of the Company).  Pursuant to the Agreement, CCB has been appointed as a non-exclusive Brand Manager of the Company’s Tequila Alebrijes brand.  CCB intends to perform certain services for the Company in connection with the planning, launch, creation, branding, market research, advertising, marketing, consulting, creative and/or digital services and sales for the Brand, the Company’s Tequila Alebrijes product and the Company. CCB will receive 10% of the gross revenue received from the sale of the products marketed under the Brand Management Agreement.

The Brand Management Agreement is for a term of two years subject to earlier termination as set forth in the Agreement. As of the date of this report, the Brand Management Agreement has not resulted in the sale of any of the Company’s product and the Company anticipates that it will either terminate or modify the agreement and seek other product market alternatives. We have been in discussions with other entities concerning brand management and distribution services and we anticipate that we will attempt to expand brand management and distribution services to other service providers.

Promissory Note Default

On April 25, 2019, the Company received a demand letter from Auctus Fund LLC’s (“Auctus”) legal counsel that stated, among other things, that the Company has defaulted on the Auctus Note (Note 5).  The demand letter further stated that as a result of such breaches and the default remedy provisions of the Auctus Note set forth therein, as of April 25, 2019, the Company, owes Auctus at least $490,767, comprised of outstanding principal of $300,000, accrued interest of $12,178, and liquidated damages of $178,589.

We have communicated with Auctus regarding these matters and are under advisement from our legal counsel that, although we have defaulted on the Auctus Note and as such are accruing the default interest of 24% as stated within the Auctus Note, we are not otherwise in breach of the Auctus Note.  We are unable to predict whether we will be able to enter into a workable resolution with Auctus.  If not, Auctus could commence collection action against the Company and seek to foreclose on our assets and seek other remedies.  We and our legal counsel believe the likelihood of this action is remote, and therefore have not accrued for any potential damages at September 30, 2020 and December 31, 2019.

NOTE 8 – EQUITY TRANSACTIONS

Common Stock

The Company has authorized 140,000,000 shares of common stock with a par value of $0.001. On August 29, 2019, the Company issued 50,000 shares of its common stock for legal services rendered to the Company totaling $15,000. On November 21, 2019, the Company issued 30,000 shares of its common stock for the conversion of accrued interest and conversion fees totaling $12,600, resulting in 7,361,005 common shares issued and outstanding at September 30, 2020 and December 31, 2019.

Preferred Stock

The Company has authorized 20,000,000 shares of Preferred Stock with no shares designated, issued, or outstanding prior to December 2019.  On December 10, 2019, the Company designated 50,000 shares of Series D Preferred Stock (“Series D”) with par value of $0.001.  Each share of Series D participates in dividends and liquidation equal to common stock, is convertible into common stock at the option of the holder on a one-for-one basis and carries 10,000 common votes on any matter submitted to common stockholder vote.

F-5 

SPIRITS TIME INTERNATIONAL, INC.

Notes to the Financial Statements

September 30, 2020

(Unaudited)

Also, on December 10, 2019, the Company issued 5,000 shares of its Series D Preferred Stock for the conversion of related party accrued interest of $10,000.  The Series D were valued at $.046 per share by an independent, qualified valuation firm in accordance with the fair value standard set forth in ASC 820-10-35-37, “Fair Value Measurement” (the “Valuation”).  The Valuation was performed using a complex market approach and option pricing model allocation methodology, which took into account various factors and inputs to allocate a control premium due to the super-majority voting designation.   The $228 total value of the 5,000 shares of Series D issued in connection with satisfaction of this related party debt resulted in the remaining $9,772 being recorded in additional paid-in capital as related party debt forgiveness (Note 4).

NOTE 9 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events from September 30, 2020 through the date the financial statements were issued and concluded there were no items that required recognition or disclosure in its financial statements.

F-6 

Item 2. Management's Discussion and Analysis of Financial Condition and Plan of Operations

FORWARD LOOKING STATEMENTS

This report contains forward-looking statements that involve risk and uncertainties. We use words such as "anticipate," "believe," "plan," "expect," "future," "intend," and similar expressions to identify such forward-looking statements. Investors should be aware that all forward-looking statements contained within this filing are good faith estimates of management as of the date of this filing and actual results may differ materially from historical results or our predictions of future results.

General Financial Matters

Our auditor’s report on our financial statements for the year ended December 31, 2019 contained a going concern qualification expressing substantial doubt about our ability to continue as a going concern.  Our liabilities significantly exceed our assets and we have yet to generate revenue from operations. Our primary creditor has claimed a default under the Promissory Note we issued to such creditor.  For us to continue to achieve our business plan we need to raise significant additional capital of which there can be no assurance. An investment in the Company would create a significant risk of loss to an investor.

Overview

Spirits Time International, Inc. (the “Company”) was incorporated on October 18, 2005 under the laws of the State of Nevada.  The Company was formed under the name of Sears Oil and Gas Corporation but effective October 22, 2018, our name was changed to Spirits Time International, Inc. to reflect our new business direction.

At the time the Company was organized, its principal business objective was to engage in the oil and gas business. The Company became a public reporting company by filing a Form S-1 Registration Statement with the SEC that was declared effective July 25, 2008.  The Company’s business operations in the oil and gas business were not successful and its initial principals sold controlling interest in the Company.   Prior to the Asset Acquisition (as defined below), we were a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended).  As a result of the Asset Acquisition, we ceased to be a “shell company” and intend to commence operations in the beverage industry (initially in the tequila beverage industry).  

We have limited operating history, no revenue, and negative working capital.

On September 28, 2018, we completed and closed upon an Asset Acquisition Transaction (the “Acquisition”) and a Loan Transaction pursuant to which we intend to engage in the business of marketing tequila products under the brand name of Tequila Alebrijes.  We acquired the Tequila Alebrijes brand name, trademark and certain other assets from Human Brands International, Inc., a Nevada corporation (“Human Brands”).    

We intend to look for other beverage brand acquisition transactions in the future.

Plan of Operations

Prior to the Asset Acquisition transaction, we were a shell company with no substantive operations. The purpose of the Company was to seek and investigate potential assets, properties or businesses to acquire while complying with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements.

We have developed a business plan to obtain rights to develop a portfolio of beverage (alcoholic and non-alcoholic) product brands and to distribute and market beverage products nationally and internationally. Our first brand is the “Tequila Alebrijes” brand of tequila.  We obtained the trademark for this brand and the rights to market and distribute Tequila Alebrijes products.  We also acquired approximately 12,000 bottles of tequila valued at $150,000, of which approximately 6,500 valued at approximately $80,000 are on-hand as further described below. The remaining 5,500 were never delivered to us, resulting in the write-off of inventory of $69,530 during the year ended December 31, 2019. Currently, the “Tequila Alebrijes” brand of tequila is our only product brand.

We do not intend to produce beverage products but rather we intend to acquire brand and marketing rights for beverage products and thereafter commercialize our products either directly by selling to retailers and point of sale locations or through brand management agreements and/or distribution agreements with other companies involved in the beverage distribution business.

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Acquisition of Assets

On September 13, 2018, we entered into an Asset Purchase Agreement to purchase inventory and intangible assets from Human Brands, as described above.  As of the periods presented and date of this filing, we have no additional assets, other than a nominal amount of cash.

The Company’s Business Plan - General

Our new business plan is to engage in the business of acquiring rights to market non-alcoholic and alcoholic beverage brands. As described above, our first acquisition was the Tequila Alebrijes brand of tequila. Currently, that is our only product brand.

Demand for premium distilled spirits brands is driving growth and transforming the distilled spirits industry, driven by several key trends including an increasingly global market for alcoholic beverages, better and more well-defined channels of distribution, an international and domestic rise of cocktail culture, the growing popularity for distilled spirits, a greater desire among consumers wanting to know more about the history and production methods behind what they drink, an increase in the willingness of consumers to enjoy experimenting and trying new brands, categories and styles of alcoholic beverages, the identifiable industry trend showing increasing demand for a broader variety and new brands at the point of sale, and a higher level of appreciation of quality over quantity, with premium and above offerings gaining market share.

Amidst the background where industry leading producers are shifting more emphasis on premium brand offerings, an emerging wave of small craft distillers is capturing an increasing market share. As the craft boom continues, we anticipate that larger brands will increase their emphasis on craft qualities and will look to emerging brands gaining consumer support as acquisition candidates.

We intend, subject to adequate financing, to build a portfolio of beverage brands of non-alcoholic and alcoholic beverages. We anticipate that we may be able to use our securities to acquire interests in additional beverage brands and as incentive for brand managers and other product distributors.  

We entered into a non-exclusive brand management agreement with CapCity Beverage, LLC (“CCB”).  CCB is an affiliate of Human Brands (our significant shareholder), which has been active in developing, distributing and promoting premium spirits brands since 2012.  The brand management agreement calls for CCB to utilize its import and export licenses to bring the Tequila Alebrijes inventory into the U.S. from Mexico and also ship the product to other countries around the world.

As of September 30, 2020, the brand management agreement has not resulted in the sale of any of our product and we anticipate that we will either terminate or modify the agreement and seek other product market alternatives.

Ultimate Business Goal

One of our ultimate business goals is to develop critical mass and a diverse portfolio of distilled spirits and non-alcoholic brands to make us an attractive acquisition target or an attractive partner for other companies in the beverage industry.

To achieve this goal, we plan on developing diverse channels of distribution by building relationships with strong regional and local distributors.  To support our distributors, we plan to work with brand managers to create marketing, support consumer awareness, and to develop demand at the retail level in liquor stores and bars.

Our planned operating strategy.

Our business strategy relates to our Tequila Alebrijes product and potentially other distilled spirits brands and non-alcoholic brands. We have developed a strategy to commence and build operations in the premium spirits industry.  Our strategy is as follows:

(1)Building Our Branded Product Portfolio.  We plan to build a portfolio of distilled spirit and non-alcoholic brands through distribution agreements, acquisitions of distributors and brands, and potentially the development of our own proprietary brands.  We intend to attempt to add products in high-demand and in high-growth categories.   Our first brand acquisition, as described throughout this Form 10-Q, is the acquisition of the Tequila Alebrijes brand. 

(2)Qualify for Our Own Licenses and Permits. Initially we are relying on “Brand Management Agreements” with companies that already have distribution channels and have import and export licenses and permits. In addition, we will be contracting with US domestic distributors that have permits and licenses in a large number of key states for spirits sales. In  

5 

addition, our Brand Management companies will have the logistical capability to store, ship and comply with all state and federal regulations and accounting requirements.  The Brand Manager will also be responsible for collecting and reporting on all taxes, customs compliance and shipping regulations. Presently, our non-exclusive Brand Manager for our Tequila Alebrijes brand is CCB.  The CCB Brand Management Agreement is further discussed below.

(3)Build Distribution.   If, in the future, we obtain required permits, we intend to focus on building additional distribution for Tequila Alebrijes and other brands in the U.S. and Asia, the largest beverage market and the fastest growing beverage market, respectively.  

(4)Marketing.  We plan to bring the enjoyment of the Tequila Alebrijes experience to the customer. Key to scaling our business activities is our commitment to, and investment in innovative and effective sales and marketing campaigns, and supporting demand generated from those campaigns with sufficient inventory. Consumers want an experience and our marketing strategy is built around that. 

Our first proprietary brand, Tequila Alebrijes, is a premium tequila.  Our Tequila Alebrijes product is expected to be shipped to the Brand Manager as needed for distribution.

In addition to CCB, we are discussing potential product distribution relationships with other participants in the beverage distribution industry.  

We anticipate that in order to achieve our marketing strategy for our Tequila Alebrijes brand and acquire and market other brands, we will be required to obtain significant capital from equity and debt sources. There can be no assurance that we will be able to obtain adequate additional capital as we need it or even if it is available, that it will be on terms and conditions that are acceptable and commercially reasonable.  We anticipate that we will issue shares of our capital stock to raise additional capital, to attract third party distribution networks, attempt to acquire interests in other brands and for employee compensation.

Results of Operations

As the result of the acquisition of the Tequila Alebrijes assets and a change of our business direction, our future operations will be completely different than our historical lack of operations and financial position.  Accordingly, the historical disclosure in this Section is not an appropriate indication of our future results of operations disclosure.

We have yet to generate any revenue from the acquisition of the tequila related assets and there can be no assurance we will be able to generate meaningful revenues in the near future.  We anticipate that we must raise additional capital to develop a meaningful marketing program for our products and there can be no assurance that we will be able to raise adequate capital to market our products and develop active business operations.

Three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019

For the three and nine months ended September 30, 2020 and 2019, the Company had no revenue.  For the three months ended September 30, 2020, the Company incurred $8,086 of professional fees compared to $34,815 for the three months ended September 30, 2019.  For the nine months ended September 30, 2020, the Company incurred $40,160 of professional fees compared to $102,996 for the nine months ended September 30, 2019.  Such expenses consist primarily of legal and accounting fees, as well as annual fees required to maintain the Company’s corporate status.  The decrease is due primarily to legal and accounting fees incurred during the three and nine months ended September 30, 2019 related to the Asset Acquisition.  For the three months ended September 30, 2020, the Company incurred $2,509 of selling, general and administrative expenses compared to $4,404 for the three months ended September 30, 2019.  For the nine months ended September 30, 2020, the Company incurred $6,168 of selling, general and administrative expenses compared to $21,789 for the nine months ended September 30, 2019.  The decrease is due primarily to marketing and travel fees incurred during the three and nine months ended September 30, 2019 related to the Asset Acquisition.  For the three months ended September 30, 2020, the Company incurred $25,701 of interest expense on notes payable compared to $21,096 for the three months ended September 30, 2019.  For the nine months ended September 30, 2020, the Company incurred $81,882 of interest expense on notes payable compared to $62,623 for the nine months ended September 30, 2019. The increase in interest expense is a result of the increase in loans payable due to related parties.       

As a result of the foregoing, the Company incurred a loss of $36,296 and $60,315, respectively, for the three months ended September 30, 2020 and 2019, and a loss of $128,210 and $187,408, respectively, for the nine months ended September 30, 2020 and 2019.    

6 

Liquidity

As of September 30, 2020, the Company had $580 of cash and negative working capital of $777,827.  This compares with cash of $163 and negative working capital of $649,617 as of December 31, 2019.

For the nine months ended September 30, 2020, the Company used cash of $32,833 in operations consisting of the loss of $128,210 which was offset by changes in accounts payable and accrued interest of $76,030 and changes in accrued interest due to related parties of $19,347.  This compares with $110,470 used in operations for the nine months ended September 30, 2019 consisting of the loss of $187,408 which was offset by stock based compensation of $15,000, the amortization of debt discounts of $17,812, changes in accounts payable and accrued interest of $39,219 and changes in accrued interest due to related parties of $4,907.

There were no investing activities during the nine months ended September 30, 2020 and 2019.    

For the nine months ended September 30, 2020, financing activities provided $33,250 which consisted of proceeds from notes payable of $5,000 and proceeds from loans payable to related parties of $28,250.  This compares with $9,565 used by financing activities for the nine months ended September 30, 2019 consisting of payments on loans payable to related parties of $17,565 and proceeds from loans payable to related parties of $8,000.      

As a result of the foregoing, there was an increase in cash of $417 for the nine months ended September 30, 2020 from the cash on hand as of December 31, 2019.  

From the date of inception (October 18, 2005) to September 30, 2020, the Company has recorded an accumulated deficit of $1,452,243, most of which were expenses relating to the initial development of the Company and maintaining reporting company status with the SEC over the past 10 years.  In order to survive as a going concern, the Company will require additional capital investments or borrowed funds to meet cash flow projections and carry forward our business objectives. There can be no guarantee or assurance that we can raise adequate capital from outside sources to fund the proposed business. Failure to secure additional financing would result in business failure and a complete loss of any investment made into the Company.

Our ability to continue as a going concern in the next 12 months depends on our ability to obtain sources of capital to fund our continuing operations and to fund our operations in the beverage industry. As of September 30, 2020, our remaining cash balance is not sufficient to cover our current liabilities, obligations and working capital needs for the balance of 2020. We will continue to rely on loans from management and/or affiliated shareholders or we may raise additional capital through an interim financing to meet our general cash flow requirements until such time as we are able to complete the acquisition of an operating company.  

In September 2018, we obtained funds from the issuance of a Secured Promissory Note that is described above.  Our net proceeds from that transaction have been used to repay outstanding debt, to fund the professional fees in connection with such transaction and the Asset Acquisition Transaction, for use in our beverage operations and for working capital.  We anticipate that we will attempt to raise additional capital from the sale of our securities during the next two quarters to fund or operations.  There are no assurances, however, that we will be able raise the necessary additional capital to fund our operations in the beverage industry.

As described in Part II Item 3, the lender under the Secured Promissory Note has notified us of a claimed default under the Note. The Note is secured by all of the assets of the Company.  We currently do not have cash available to repay the Note and there is no assurance that we will ever have liquid assets necessary to repay the Note.

Employees

As of the date of this report, we have no employees. We currently rely on related parties such as our non-exclusive Brand Manager, CCB, and third parties such as CCB’s subcontractor, Tequila Armero. Subject to adequate financing and business needs we will retain employees, third party consultants, agents and other service providers on an as needed basis.

Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements that had or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a

7 

retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4. Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a Company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on this evaluation, the chief executive officer and chief financial officer concluded that the disclosure controls and procedures are designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in the Company’s periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported within the time periods specified.  The Company’s chief executive officer and chief financial officer also concluded that the disclosure controls and procedures were not effective as of the end of the period covered by this report to provide reasonable assurance of the achievement of these objectives.  

Changes in Internal Controls

There were no significant changes in the Company's internal controls or, to the Company's knowledge, in other factors that could significantly affect these controls subsequent to the date of their evaluation.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is currently not a party to any pending legal proceedings. As described in Part II, Item 3 of this Form 10-Q, we have been notified that Auctus Fund, LLC has claimed a default under the Promissory Note we issued to Auctus in September 2018.  Although we are attempting to resolve this issue with Auctus, there can be no assurance that Auctus will not commence a legal proceeding in connection with such claimed default.

No director, officer, or affiliate of the Company and no owner of record or beneficial owner of more than 5% of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.

Item 1A. Risk Factors

This item is not applicable to smaller reporting companies.  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

8 

Item 3. Defaults Upon Senior Securities

On September 24, 2018, the Company entered into a Securities Purchase Agreement (the "Auctus Securities Purchase Agreement") under which it issued a Senior Secured Convertible Promissory note in an aggregate principal amount of $300,000 (the "Auctus Note") to Auctus Fund, LLC ("Auctus"). The principal amount of the Auctus Note accrues interest at the rate of 10% per annum. The Auctus Note calls for default interest at the rate of 24% per annum. The maturity date of the Auctus Note was September 24, 2019.  The Auctus Note is secured by all of the assets of the Company.  Auctus has the option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the Auctus Note into shares of the Company's common stock at the Auctus Conversion Price.  The Auctus Conversion Price, subject to the adjustments described in the Auctus Note, shall equal the lesser of:

(i) 50% multiplied by the lowest Trading Price (as defined in the Auctus Note) (representing a discount rate of 50%) during the previous twenty-five (25) Trading Day period ending on the latest complete Trading Day (as defined in the Auctus Note) prior to the date of the Note, and 

(ii) the Variable Conversion Price (as defined in the Auctus Note herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).  The “Variable Conversion Price” shall mean 50% multiplied by the Market Price (as defined in the Auctus Note) (representing a discount rate of 50%) 

The Note provides that the conversion price may be adjusted downward upon the occurrence of certain events or the failure of certain events to occur.

The Auctus Note contains provisions relating to events and actions that, if to occur or not occur, would result in an Event of Default under the Auctus Note.  One Event of Default is as follows:

The Company fails to (i) file a registration statement covering the  Auctus (or a successor holder’s) (“Holder”) resale of all of the shares underlying the Auctus Note (the “Registration Statement”) within ninety (90) days following the Issue Date (as defined in the Auctus Note), (ii) cause the Registration Statement to become effective within one hundred ninety (190) days following the Issue Date, (iii) cause the Registration Statement to remain effective until the Note is satisfied in full, (iv) comply with the Registration Rights Agreement between the Company and Holder entered into in connection with the issuance of this Note, or (v) immediately amend the Registration Statement or file a new Registration Statement (and cause such Registration Statement to become immediately effective) if there are no longer sufficient shares registered under the initial Registration Statement for the Holder’s resale of all of the shares underlying the Note.

Under the Auctus loan documents, the registration statement for the shares underlying the Auctus Note was required to be filed by the Company on or about December 23, 2018.  The Company did not file the required registration statement on that date.  Subsequent to December 23, 2018, the Company had communication with Auctus in connection with a potential agreed upon delay in the filing of the registration statement, but no written agreement relating to a waiver or forbearance was entered into by the Company and Auctus.

Notification of Default

On April 25, 2019, the Company received a demand letter from Auctus’s legal counsel that stated, among other things, that the Company has defaulted on the Auctus Note pursuant to: 

•Sections 2.8 (Non-circumvention);  

•3.1 (Failure to pay Principal or interest - acceleration);  

•3.4 (Breach of Agreements and Covenants – Sections 2.8 of the Note – (Non-circumvention); and  

•3.5 (Breach of Representations and Warranties – Section 3(g) (SEC Documents; Financial Statements) of that certain Securities Purchase Agreement (the “SPA”) by and between the Company and Auctus dated September 24, 2018; and 3.25 (Failure to Register) (this is not an exhaustive delineation of potential breaches).  

9 

The demand letter further stated that as a result of such breaches and the default remedy provisions of the Note set forth therein at pages 20 and 21 thereof, as of April 25, 2019, the Company, owed Auctus at least $490,767 calculated as follows:  

Outstanding principal of $300,000 + accrued interest of $12,178 + $15,000 liquidated damages relating back to the Auctus Note issuance date for breach of Section 3.1 + 50% liquidated damages of $163,589 for default under Sections other than Section 3.2. 

Uncertainty of Outcome.   We have communicated with Auctus regarding the matters described in this Item 3 but are unable to predict whether we will be able to enter into a workable resolution with Auctus.  If not, Auctus could commence collection action against the Company and seek to foreclose on our assets and seek other remedies.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits for this Form 10-Q, and are incorporated herein by this reference.

10 

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 23, 2020Spirits Time International, Inc. 

By: /s/ Mark A. Scharmann                                

Mark A. Scharmann, President, Chief Executive Officer, 

Principal Financial and Accounting Officer  

Exhibit No.	Description
31.1	Certification of the Principal Executive and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Principal Executive and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101. INSXBRL Instance Document^† 

101. PREXBRL Taxonomy Extension Presentation Linkbase^† 

101. LABXBRL Taxonomy Extension Label Linkbase^† 

101. DEFXBRL Taxonomy Extension Label Linkbase^† 

101. CALXBRL Taxonomy Extension Label Linkbase^† 

101. SCHXBRL Taxonomy Extension Schema^† 

*

Incorporated by reference from previous filings of the Company.

^†

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and not “filed” or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, or deemed “furnished” and not “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

11 

EX-31

CERTIFICATION

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the accompanying Quarterly Report on Form 10-Q of Spirits Time International, Inc. (the "Company") for the quarter ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof, the undersigned, in the capacity and date indicated below, hereby certifies that:

     1. I have reviewed this quarterly report on Form 10-Q of Spirits Time International, Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

     3. Based on my knowledge, the financial statements, and other financial information included in this amended quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report;

     4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the Company's internal control over financial reporting; and

      5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of Company's board of directors (or persons performing the equivalent functions):

     (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably  likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

     (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.

Date:  November 23, 2020By: /s/ Mark A. Scharmann 

Mark A. Scharmann, President, Chief Executive Officer, 

Principal Executive and Accounting Officer 

4 

EX-32

CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     I, Mark A. Scharmann, Chief Executive Officer and Chief Financial Officer of Spirits Time International, Inc. (the "Company") certify that:

     1. I have reviewed the quarterly report on Form 10-Q of Spirits Time International, Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and

     3. Based on my knowledge, the financial statements, and other financial information included in this amended quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the period presented in this amended quarterly report.

Date:  November 23, 2020

/s/ Mark A. Scharmann 

Mark A. Scharmann,

Chief Executive Officer

Principal Executive and Accounting Officer

4 

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2020	Nov. 23, 2020
Details
Registrant CIK	0001434737
Fiscal Year End	--12-31
Registrant Name	SPIRITS TIME INTERNATIONAL, INC.
SEC Form	10-Q
Period End date	Sep. 30, 2020
Tax Identification Number (TIN)	20-3455830
Number of common stock shares outstanding		7,361,005
Filer Category	Non-accelerated Filer
Current with reporting	Yes
Interactive Data Current	Yes
Shell Company	false
Small Business	true
Emerging Growth Company	false
Document Quarterly Report	true
Entity File Number	333-151300
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	1661 Lakeview Circle
Entity Address, City or Town	Ogden
Entity Address, State or Province	UT
Entity Address, Postal Zip Code	84403
Country Region	801
City Area Code	399
Local Phone Number	3632
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Document Transition Report	false

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Balance Sheets - USD ($)	Sep. 30, 2020	Dec. 31, 2019
CURRENT ASSETS
Cash and cash equivalents	$ 580	$ 163
Inventory	80,404	80,404
Total Current Assets	80,984	80,567
OTHER ASSETS
Intangible assets	275,000	275,000
TOTAL ASSETS	355,984	355,567
CURRENT LIABILITIES
Accounts payable	126,096	112,600
Accrued interest	97,173	34,639
Accrued interest - related parties	71,879	52,532
Loans payable - related parties	173,663	145,413
Convertible notes payable - related parties	55,000	55,000
Convertible note payable	290,000	290,000
Notes payable	45,000	40,000
Total Current Liabilities	858,811	730,184
TOTAL LIABILITIES	858,811	730,184
COMMITMENTS AND CONTINGENCIES (NOTE 8)	0	0
STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value; 20,000,000 shares authorized Preferred stock designated, Series D, $0.001 par value, 50,000 shares authorized, 5,000 shares issued and outstanding	5	5
Common stock, $0.001 par value; 140,000,000 shares authorized, 7,361,005 shares issued and outstanding	7,361	7,361
Additional paid-in capital	942,050	942,050
Accumulated deficit	(1,452,243)	(1,324,033)
Total Stockholders' Deficit	(502,827)	(374,617)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 355,984	$ 355,567

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Balance Sheets - Parenthetical - $ / shares	Sep. 30, 2020	Dec. 31, 2019
Preferred Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	20,000,000	20,000,000
Common Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Common Stock, Shares Authorized	140,000,000	140,000,000
Common Stock, Shares, Issued	7,361,005	7,361,005
Common Stock, Shares, Outstanding	7,361,005	7,361,005
Series D Preferred Stock
Preferred Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	50,000	50,000
Preferred Stock, Shares Issued	5,000	5,000
Preferred Stock, Shares Outstanding	5,000	5,000

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Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Details
NET REVENUES	$ 0	$ 0	$ 0	$ 0
OPERATING EXPENSES
Professional fees	8,086	34,815	40,160	102,996
Selling, general and administrative	2,509	4,404	6,168	21,789
Total Operating Expenses	10,595	39,219	46,328	124,785
LOSS FROM OPERATIONS	(10,595)	(39,219)	(46,328)	(124,785)
OTHER INCOME (EXPENSES)
Interest expense	(25,701)	(21,096)	(81,882)	(62,623)
Total Other Income (Expenses)	(25,701)	(21,096)	(81,882)	(62,623)
LOSS BEFORE INCOME TAXES	(36,296)	(60,315)	(128,210)	(187,408)
PROVISION FOR INCOME TAXES	0	0	0	0
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ (36,296)	$ (60,315)	$ (128,210)	$ (187,408)
Earnings Per Share, Basic and Diluted	$ (0.00)	$ (0.01)	$ (0.02)	$ (0.03)
Weighted Average Number of Shares Outstanding, Basic and Diluted	7,361,005	7,298,396	7,361,005	7,286,866

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Statements of Stockholders' Equity (Deficit) - USD ($)	Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings	Total
Stockholders' Equity Attributable to Parent, Beginning Balance at Dec. 31, 2018	$ 0	$ 7,281	$ 684,537	$ (1,028,638)	$ (336,820)
Shares, Outstanding, Beginning Balance at Dec. 31, 2018		7,281,005
Amortization of debt premium	0	$ 0	74,999	0	74,999
Net loss	0	0	0	(56,663)	(56,663)
Stockholders' Equity Attributable to Parent, Ending Balance at Mar. 31, 2019	0	$ 7,281	759,536	(1,085,301)	(318,484)
Shares, Outstanding, Ending Balance at Mar. 31, 2019		7,281,005
Stockholders' Equity Attributable to Parent, Beginning Balance at Dec. 31, 2018	0	$ 7,281	684,537	(1,028,638)	(336,820)
Shares, Outstanding, Beginning Balance at Dec. 31, 2018		7,281,005
Common stock issued for services					15,000
Net loss					(187,408)
Stockholders' Equity Attributable to Parent, Ending Balance at Sep. 30, 2019	0	$ 7,331	919,485	(1,216,046)	(289,230)
Shares, Outstanding, Ending Balance at Sep. 30, 2019		7,331,005
Stockholders' Equity Attributable to Parent, Beginning Balance at Mar. 31, 2019	0	$ 7,281	759,536	(1,085,301)	(318,484)
Shares, Outstanding, Beginning Balance at Mar. 31, 2019		7,281,005
Amortization of debt premium	0	$ 0	75,000	0	75,000
Net loss	0	0	0	(70,430)	(70,430)
Stockholders' Equity Attributable to Parent, Ending Balance at Jun. 30, 2019	0	$ 7,281	834,536	(1,155,731)	(313,914)
Shares, Outstanding, Ending Balance at Jun. 30, 2019		7,281,005
Common stock issued for services	0	$ 50	14,950	0	15,000
Common stock issued for services, shares		50,000
Amortization of debt premium	0	$ 0	69,999	0	69,999
Net loss	0	0	0	(60,315)	(60,315)
Stockholders' Equity Attributable to Parent, Ending Balance at Sep. 30, 2019	0	$ 7,331	919,485	(1,216,046)	(289,230)
Shares, Outstanding, Ending Balance at Sep. 30, 2019		7,331,005
Stockholders' Equity Attributable to Parent, Beginning Balance at Dec. 31, 2019	$ 5	$ 7,361	942,050	(1,324,033)	(374,617)
Shares, Outstanding, Beginning Balance at Dec. 31, 2019	5,000	7,361,005
Net loss	$ 0	$ 0	0	(46,241)	(46,241)
Stockholders' Equity Attributable to Parent, Ending Balance at Mar. 31, 2020	$ 5	$ 7,361	942,050	(1,370,274)	(420,858)
Shares, Outstanding, Ending Balance at Mar. 31, 2020	5,000	7,361,005
Stockholders' Equity Attributable to Parent, Beginning Balance at Dec. 31, 2019	$ 5	$ 7,361	942,050	(1,324,033)	(374,617)
Shares, Outstanding, Beginning Balance at Dec. 31, 2019	5,000	7,361,005
Common stock issued for services					0
Net loss					(128,210)
Stockholders' Equity Attributable to Parent, Ending Balance at Sep. 30, 2020	$ 5	$ 7,361	942,050	(1,452,243)	(502,827)
Shares, Outstanding, Ending Balance at Sep. 30, 2020	5,000	7,361,005
Stockholders' Equity Attributable to Parent, Beginning Balance at Mar. 31, 2020	$ 5	$ 7,361	942,050	(1,370,274)	(420,858)
Shares, Outstanding, Beginning Balance at Mar. 31, 2020	5,000	7,361,005
Net loss	$ 0	$ 0	0	(45,673)	(45,673)
Stockholders' Equity Attributable to Parent, Ending Balance at Jun. 30, 2020	$ 5	$ 7,361	942,050	(1,415,947)	(466,531)
Shares, Outstanding, Ending Balance at Jun. 30, 2020	5,000	7,361,005
Net loss	$ 0	$ 0	0	(36,296)	(36,296)
Stockholders' Equity Attributable to Parent, Ending Balance at Sep. 30, 2020	$ 5	$ 7,361	$ 942,050	$ (1,452,243)	$ (502,827)
Shares, Outstanding, Ending Balance at Sep. 30, 2020	5,000	7,361,005

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Statements of Cash Flows - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (128,210)	$ (187,408)
Adjustments to reconcile net loss to net cash
Stock based compensation	0	15,000
Amortization of Debt Discount (Premium)	0	17,812
Changes in operating assets and liabilities:
Accounts payable and accrued interest	76,030	39,219
Accrued interest - related parties	19,347	4,907
Net Cash Used by Operating Activities	(32,833)	(110,470)
CASH FLOWS FROM INVESTING ACTIVITIES	0	0
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable	5,000	0
Payments on loans payable - related parties	0	(17,565)
Proceeds from loans payable - related parties	28,250	8,000
Net Cash Provided (Used) by Financing Activities	33,250	(9,565)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	417	(120,035)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	163	121,739
CASH AND CASH EQUIVALENTS AT END OF PERIOD	580	1,704
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	0	30,619
Cash paid for income taxes	0	0
Non-cash investing and financing activities:
Amortization to additional paid-in capital of premium on convertible note payable	$ 0	$ 219,998

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NOTE 1 - CONDENSED FINANCIAL STATEMENTS

9 Months Ended

Sep. 30, 2020

Notes

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial statements at September 30, 2020 and for all periods presented have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2019 audited financial statements.  The results of operations for the period ended September 30, 2020 are not necessarily indicative of the operating results for the full year.

Loss Per Share - The computations of basic loss per share of common stock are based on the weighted average number of shares outstanding at the date of the financial statements. During the nine months ended September 30, 2020 and 2019, the Company had warrants outstanding that are exercisable into 42,857 shares of common stock, and convertible debt outstanding that is convertible into 219,383 shares of common stock.  The common stock issuable from the warrants and convertible debt was not included, as it would be anti-dilutive due to continuing losses.

Nine Months Ended	Loss (Numerator)	Shares (Denominator)	Per Share Amount
September 30, 2020	$               (128,210)	7,361,005	$             (0.02)
September 30, 2019	$              (187,408)	7,286,866	$             (0.03)

Inventory - Inventory consists of bottled tequila acquired in the acquisition of the Tequila Alebrijes products and intangibles and is held by a third-party tequila production warehouse in Tequila Jalisco, Mexico. Inventory is stated at lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method. As of September 30, 2020 and December 31, 2019, the Company had finished goods bottled tequila inventory on-hand totaling $80,404 and $80,404, respectively. The Company has determined that no reserve for obsolete or slow-moving inventory is necessary as of September 30, 2020 or December 31, 2019.

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NOTE 2 - INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2020

Notes

NOTE 2 - INTANGIBLE ASSETS

NOTE 2 – INTANGIBLE ASSETS

Intangible assets consists of the Tequila Alebrijes brand name, trademark, and property rights.  The Company has determined that no impairment of intangible assets is necessary as of September 30, 2020 or December 31, 2019.

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NOTE 3 - GOING CONCERN

9 Months Ended

Sep. 30, 2020

Notes

NOTE 3 - GOING CONCERN

NOTE 3 - GOING CONCERN

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has had no revenues and has generated losses from operations. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs, which raises substantial doubt about its ability to continue as a going concern.  The continuance of the Company as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations.

In addition, the extent of the impact of the coronavirus ("COVID‐19") outbreak on the financial performance of the Company will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions, and the impact of COVID‐19 on the overall economy, all of which are highly uncertain and cannot be predicted. If the overall economy is impacted for an extended period, the Company’s future operating results may be materially adversely affected.

The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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NOTE 4 -RELATED PARTY LOANS AND OTHER TRANSACTIONS

9 Months Ended

Sep. 30, 2020

Notes

NOTE 4 -RELATED PARTY LOANS AND OTHER TRANSACTIONS

NOTE 4 – RELATED PARTY LOANS AND OTHER TRANSACTIONS

During the nine months ended September 30, 2020 and 2019, the Company received loans in the amount of $28,250 and $8,000, respectively, from related parties of the Company.  These loans accrue interest at the rate of 12% per annum, are due on demand and are not convertible into common stock of the Company.  The balances due on non-convertible loans payable to related parties were principal of $173,663 and $145,413 plus accrued interest of $38,857 and $24,451 as of September 30, 2020 and December 31, 2019, respectively.  

Beginning August 2017, the Company entered into an oral agreement to pay the Company’s sole director $500 per month as payment for use of his personal residence as the Company’s office and mailing address.  The Company has recorded rent expense of $4,500 during the nine months ended September 30, 2020 and 2019 which is included in the selling, general and administrative expenses on the statements of operations.

On October 29, 2018, we entered into a non-exclusive Brand Management Agreement (“Brand Management Agreement”) with CapCity Beverage, LLC (“CCB”) for the brand Tequila Alebrijes (“Brand”).  CCB is a wholly-owned subsidiary of HBI, which currently owns approximately 44% of our common stock.  A copy of the Brand Management Agreement was attached as an Exhibit to a Form 8-K filed by the Company with the SEC on November 1, 2018.  See Note 7 for details.

In March 2014, the Company issued a $40,000 convertible promissory note to the sole officer and director of the Company and a $15,000 convertible promissory note to another affiliated shareholder (the “Convertible Notes”). The Convertible Notes had a term of one year expiring March 2015, and are now payable on demand, and accrue interest at the rate of 12% per annum. The holders of the Convertible Notes, may, at their option, convert all or any portion of the outstanding principal balance of, and all accrued interest on the Convertible Notes into shares of the Company’s common stock, par value $0.001 per share, at a conversion rate of $1.00 per share.  During the year ended December 31, 2019, $10,000 of accrued interest was converted into 5,000 shares of Preferred Stock valued at $228, resulting in a $9,772 gain being recorded as forgiveness of related party debt in additional paid-in capital (Note 8).  No principal or interest has been paid on these Notes.  As of September 30, 2020 and December 31, 2019, the balance due to these related parties for these Notes was principal of $55,000 and $55,000, respectively, and accrued interest of $33,022 and $28,081, respectively.  

Convertible notes and loans payable – related parties consisted of the following:

	September 30, 2020	December 31, 2019
Loans payable to related parties, interest at 12%  per annum, due on demand	173,663	145,413
Convertible notes payable to related parties, interest at 12% per annum, due on March 7, 2015 (in default), convertible into common stock at $1.00 per share	55,000	55,000
Total Convertible Notes and Loans Payable – Related Parties	228,663	200,413
Less: Current Portion	(228,663)	(200,413)
Long-Term Convertible Notes and Loans Payable – Related Parties	$   -	$     -

Accrued interest on the convertible notes and loans payable, related parties was $71,879 and $52,532 at September 30, 2020 and December 31, 2019, respectively.  The Company did not record beneficial conversion feature elements on the related party convertible debt due to the conversion rate of $1.00 per share being greater than the fair market value of the underlying shares on the date of issuance.

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NOTE 5 - CONVERTIBLE PROMISSORY NOTES / RELATED AND NON-RELATED PARTIES

9 Months Ended

Sep. 30, 2020

Notes

NOTE 5 - CONVERTIBLE PROMISSORY NOTES / RELATED AND NON-RELATED PARTIES

NOTE 5 – CONVERTIBLE PROMISSORY NOTES / NON-RELATED PARTIES

The Company has a collateralized convertible debt obligation with Auctus Fund, LLC, an unaffiliated entity, outstanding at September 30, 2020 and December 31, 2019 as follows:

Note (A)	Principal(1)	Less Debt Discount	Plus Premium	Net Note Balance	Accrued Interest
September 30, 2020	$         290,000	$                    -	$                 -	$         290,000	$      89,723
December 31, 2019	$         290,000	$                    -	$     -	$         290,000	$      31,023

(1)Collateralized by the Company’s assets, including accounts receivable, cash and equivalents, inventory, property, equipment, intangibles.  At September 30, 2020 and December 31, 2019, the Company’s assets consisted of cash and equivalents of $580 and $163, respectively, inventory of $80,404, and intangible assets of $275,000, for total carrying value of $355,984 and $355,567, respectively. 

(A)On September 24, 2018 (the “Date of Issuance”) the Company issued a convertible promissory note (the “Note”) with a face value of $300,000, maturing on September 24, 2019, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 1 month of the funding of the note into a variable number of the Company's common stock, based on a conversion rate of 50% of the lowest trading price for the 25 days prior to conversion. The note was funded on September 28, 2018, when the Company received proceeds of $276,250, after disbursements for the lender's transaction costs, fees and expenses which in aggregate resulted in a total discount of $23,750 to be amortized to interest expense over the life of the note. Additionally, the note’s variable conversion rate component requires that the note be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note’s undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note. As such, the Company recorded a premium on the note of $299,998 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $1.825 per share (50% of the lowest trading price during the 25 days preceding the note's issuance), which computed to 164,383 shares of 'if-converted' common stock with a redemption value of $599,998 due to $3.65 per share fair market value of the Company's stock on the note's date of issuance. Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital. During the nine months ended September 30, 2019, the Company recorded discount and premium amortization of $17,812 and $219,998, respectively.  The premium and discount were fully amortized at December 31, 2019.  This note is currently in default (Note 7). 

Along with the Note, on the Date of Issuance the Company issued 42,857 Common Stock Purchase Warrants (the “Warrants”), exercisable immediately at a fixed exercise price of $3.50 with an expiration date of September 24, 2023.  The Company has determined that the Warrants are exempt from derivative accounting and were valued at $86,750 on the Date of Inception using the Black Scholes Options Pricing Model.  Assumptions used for the Black Scholes Options Pricing Model include (1) stock price of $3.65 per share, (2) exercise price of $3.50 per share, (3) term of 5 years, (4) expected volatility of 3.87% and (5) risk free interest rate of 2.96%.  The note proceeds of $300,000 were then allocated between the fair value of the promissory note ($300,000) and the Warrants ($86,750), resulting in a debt discount of $67,292.  As the warrants are exercisable immediately, this debt discount was amortized in its entirety to interest expense on the Date of Issuance.

During the year ended December 31, 2019, the Company paid $10,000 towards principal on the Note, and $12,350 of accrued interest and $250 in conversion fees ($12,600 total) was converted into 30,000 shares of common stock.

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NOTE 6 - NOTES PAYABLE

9 Months Ended

Sep. 30, 2020

Notes

NOTE 6 - NOTES PAYABLE

NOTE 6 – NOTES PAYABLE

Notes payable consisted of the following:

	September 30, 2020	December 31, 2019
Note payable to an individual, interest at 12% per annum, issued August 1, 2018 due November 15, 2018 (in default), unsecured	$           10,000	$             10,000
Note payable to an individual, interest at 12% per annum, issued December 31, 2018 due December 31, 2019 (in default), unsecured	30,000	30,000
Note payable to an individual, interest at 12% per annum, issued May 1, 2020 due May 1, 2021, unsecured	5,000	-
Total Notes Payable	45,000	40,000
Less: Current Portion	(45,000)	(40,000)
Long-Term Notes Payable	$                     -	$                       -

Accrued interest and interest expense for these Notes as of and for the year ended December 31, 2019 totaled $3,616 and $4,800, respectively.  During the year ended December 31, 2019, interest in the amount of $1,683 was paid. Accrued interest and interest expense for these Notes as of and for the nine months ended September 30, 2020 totaled $7,450 and $3,833, respectively.    

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NOTE 7 - COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2020

Notes

NOTE 7 - COMMITMENTS AND CONTINGENCIES

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Brand Management Agreement

On October 29, 2018, the Company entered into a non-exclusive brand management agreement (“Brand Management Agreement”) with CapCity Beverage, LLC, (“CCB”), a wholly-owned subsidiary of Human Brands International, Inc. (a significant shareholder of the Company).  Pursuant to the Agreement, CCB has been appointed as a non-exclusive Brand Manager of the Company’s Tequila Alebrijes brand.  CCB intends to perform certain services for the Company in connection with the planning, launch, creation, branding, market research, advertising, marketing, consulting, creative and/or digital services and sales for the Brand, the Company’s Tequila Alebrijes product and the Company. CCB will receive 10% of the gross revenue received from the sale of the products marketed under the Brand Management Agreement.

The Brand Management Agreement is for a term of two years subject to earlier termination as set forth in the Agreement. As of the date of this report, the Brand Management Agreement has not resulted in the sale of any of the Company’s product and the Company anticipates that it will either terminate or modify the agreement and seek other product market alternatives. We have been in discussions with other entities concerning brand management and distribution services and we anticipate that we will attempt to expand brand management and distribution services to other service providers.

Promissory Note Default

On April 25, 2019, the Company received a demand letter from Auctus Fund LLC’s (“Auctus”) legal counsel that stated, among other things, that the Company has defaulted on the Auctus Note (Note 5).  The demand letter further stated that as a result of such breaches and the default remedy provisions of the Auctus Note set forth therein, as of April 25, 2019, the Company, owes Auctus at least $490,767, comprised of outstanding principal of $300,000, accrued interest of $12,178, and liquidated damages of $178,589.

We have communicated with Auctus regarding these matters and are under advisement from our legal counsel that, although we have defaulted on the Auctus Note and as such are accruing the default interest of 24% as stated within the Auctus Note, we are not otherwise in breach of the Auctus Note.  We are unable to predict whether we will be able to enter into a workable resolution with Auctus.  If not, Auctus could commence collection action against the Company and seek to foreclose on our assets and seek other remedies.  We and our legal counsel believe the likelihood of this action is remote, and therefore have not accrued for any potential damages at September 30, 2020 and December 31, 2019.

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NOTE 8 - EQUITY TRANSACTIONS

9 Months Ended

Sep. 30, 2020

Notes

NOTE 8 - EQUITY TRANSACTIONS

NOTE 8 – EQUITY TRANSACTIONS

Common Stock

The Company has authorized 140,000,000 shares of common stock with a par value of $0.001. On August 29, 2019, the Company issued 50,000 shares of its common stock for legal services rendered to the Company totaling $15,000. On November 21, 2019, the Company issued 30,000 shares of its common stock for the conversion of accrued interest and conversion fees totaling $12,600, resulting in 7,361,005 common shares issued and outstanding at September 30, 2020 and December 31, 2019.

Preferred Stock

The Company has authorized 20,000,000 shares of Preferred Stock with no shares designated, issued, or outstanding prior to December 2019.  On December 10, 2019, the Company designated 50,000 shares of Series D Preferred Stock (“Series D”) with par value of $0.001.  Each share of Series D participates in dividends and liquidation equal to common stock, is convertible into common stock at the option of the holder on a one-for-one basis and carries 10,000 common votes on any matter submitted to common stockholder vote.

Also, on December 10, 2019, the Company issued 5,000 shares of its Series D Preferred Stock for the conversion of related party accrued interest of $10,000.  The Series D were valued at $.046 per share by an independent, qualified valuation firm in accordance with the fair value standard set forth in ASC 820-10-35-37, “Fair Value Measurement” (the “Valuation”).  The Valuation was performed using a complex market approach and option pricing model allocation methodology, which took into account various factors and inputs to allocate a control premium due to the super-majority voting designation.   The $228 total value of the 5,000 shares of Series D issued in connection with satisfaction of this related party debt resulted in the remaining $9,772 being recorded in additional paid-in capital as related party debt forgiveness (Note 4).

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NOTE 9 - SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2020

Notes

NOTE 9 - SUBSEQUENT EVENTS

NOTE 9 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events from September 30, 2020 through the date the financial statements were issued and concluded there were no items that required recognition or disclosure in its financial statements.

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NOTE 1 - CONDENSED FINANCIAL STATEMENTS: Earnings Per Share, Policy (Policies)

9 Months Ended

Sep. 30, 2020

Policies

Earnings Per Share, Policy

Loss Per Share - The computations of basic loss per share of common stock are based on the weighted average number of shares outstanding at the date of the financial statements. During the nine months ended September 30, 2020 and 2019, the Company had warrants outstanding that are exercisable into 42,857 shares of common stock, and convertible debt outstanding that is convertible into 219,383 shares of common stock.  The common stock issuable from the warrants and convertible debt was not included, as it would be anti-dilutive due to continuing losses.

Nine Months Ended	Loss (Numerator)	Shares (Denominator)	Per Share Amount
September 30, 2020	$               (128,210)	7,361,005	$             (0.02)
September 30, 2019	$              (187,408)	7,286,866	$             (0.03)

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NOTE 1 - CONDENSED FINANCIAL STATEMENTS: Inventory, Policy (Policies)

9 Months Ended

Sep. 30, 2020

Policies

Inventory, Policy

Inventory - Inventory consists of bottled tequila acquired in the acquisition of the Tequila Alebrijes products and intangibles and is held by a third-party tequila production warehouse in Tequila Jalisco, Mexico. Inventory is stated at lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method. As of September 30, 2020 and December 31, 2019, the Company had finished goods bottled tequila inventory on-hand totaling $80,404 and $80,404, respectively. The Company has determined that no reserve for obsolete or slow-moving inventory is necessary as of September 30, 2020 or December 31, 2019.

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NOTE 1 - CONDENSED FINANCIAL STATEMENTS: Earnings Per Share, Policy: Schedule of EPS (Tables)

9 Months Ended

Sep. 30, 2020

Tables/Schedules

Schedule of EPS

Nine Months Ended	Loss (Numerator)	Shares (Denominator)	Per Share Amount
September 30, 2020	$               (128,210)	7,361,005	$             (0.02)
September 30, 2019	$              (187,408)	7,286,866	$             (0.03)

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NOTE 4 -RELATED PARTY LOANS AND OTHER TRANSACTIONS: Schedule of convertable debt (Tables)

9 Months Ended

Sep. 30, 2020

Tables/Schedules

Schedule of convertable debt

	September 30, 2020	December 31, 2019
Loans payable to related parties, interest at 12%  per annum, due on demand	173,663	145,413
Convertible notes payable to related parties, interest at 12% per annum, due on March 7, 2015 (in default), convertible into common stock at $1.00 per share	55,000	55,000
Total Convertible Notes and Loans Payable – Related Parties	228,663	200,413
Less: Current Portion	(228,663)	(200,413)
Long-Term Convertible Notes and Loans Payable – Related Parties	$   -	$     -

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NOTE 5 - CONVERTIBLE PROMISSORY NOTES / RELATED AND NON-RELATED PARTIES: Schedule of promissory notes (Tables)

9 Months Ended

Sep. 30, 2020

Tables/Schedules

Schedule of promissory notes

The Company has a collateralized convertible debt obligation with Auctus Fund, LLC, an unaffiliated entity, outstanding at September 30, 2020 and December 31, 2019 as follows:

Note (A)	Principal(1)	Less Debt Discount	Plus Premium	Net Note Balance	Accrued Interest
September 30, 2020	$         290,000	$                    -	$                 -	$         290,000	$      89,723
December 31, 2019	$         290,000	$                    -	$     -	$         290,000	$      31,023

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NOTE 6 - NOTES PAYABLE: Schedule of note payable (Tables)

9 Months Ended

Sep. 30, 2020

Tables/Schedules

Schedule of note payable

Notes payable consisted of the following:

	September 30, 2020	December 31, 2019
Note payable to an individual, interest at 12% per annum, issued August 1, 2018 due November 15, 2018 (in default), unsecured	$           10,000	$             10,000
Note payable to an individual, interest at 12% per annum, issued December 31, 2018 due December 31, 2019 (in default), unsecured	30,000	30,000
Note payable to an individual, interest at 12% per annum, issued May 1, 2020 due May 1, 2021, unsecured	5,000	-
Total Notes Payable	45,000	40,000
Less: Current Portion	(45,000)	(40,000)
Long-Term Notes Payable	$                     -	$                       -

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NOTE 1 - CONDENSED FINANCIAL STATEMENTS: Earnings Per Share, Policy (Details)	9 Months Ended
	Sep. 30, 2020 shares
Details
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	42,857
Conversion of Stock, Shares Converted	219,383

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NOTE 1 - CONDENSED FINANCIAL STATEMENTS: Earnings Per Share, Policy: Schedule of EPS (Details) - USD ($)			3 Months Ended						9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Details
Net loss			$ (36,296)	$ (45,673)	$ (46,241)	$ (60,315)	$ (70,430)	$ (56,663)	$ (128,210)	$ (187,408)
Weighted Average Number of Shares Issued, Basic	7,361,005	7,286,866
Earnings Per Share, Basic	$ (0.02)	$ (0.03)

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NOTE 1 - CONDENSED FINANCIAL STATEMENTS: Inventory, Policy (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Details
Inventory	$ 80,404	$ 80,404

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NOTE 4 -RELATED PARTY LOANS AND OTHER TRANSACTIONS (Details) - USD ($)		9 Months Ended
	Apr. 30, 2014	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Proceeds from loans payable - related parties		$ 28,250	$ 8,000
Loans payable - related parties		173,663		$ 145,413
Accrued interest - related parties		71,879		52,532
Preferred Stock
Stock Issued		228
Gain (Loss) on Extinguishment of Debt		9,772
Principle
Loans payable - related parties		173,663		145,413
Interest
Loans payable - related parties		38,857		24,451
Due from Related Parties, Current		33,022		28,081
Note 2
Debt Instrument, Face Amount	$ 40,000
Debt Instrument, Payment Terms	Notes had a term of one year expiring March 2015, and are now payable on demand, and accrue interest at the rate of 12% per annum.
Debt Conversion, Original Debt, Amount		$ 10,000
Debt Conversion, Converted Instrument, Shares Issued		5,000
Due from Related Parties, Current		$ 55,000		55,000
Note 3
Debt Instrument, Face Amount	$ 15,000
Related Parties
Debt Instrument, Interest Rate Terms		These loans accrue interest at the rate of 12% per annum, are due on demand and are not convertible into common stock of the Company
Loans payable - related parties		$ 173,663		145,413
Accrued interest - related parties		71,879		$ 52,532
Director 1
Operating Leases, Future Minimum Payments Due		500
Operating Lease, Expense		$ 4,500	$ 4,500

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NOTE 4 -RELATED PARTY LOANS AND OTHER TRANSACTIONS: Schedule of convertable debt (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Loans payable to related parties, interest at 12% per annum, due on demand	$ 173,663	$ 145,413
Convertible notes payable to related parties, interest at 12% per annum, due on March 7, 2015 (in default), convertible into common stock at $1.00 per share	55,000	55,000
Related Parties
Loans payable to related parties, interest at 12% per annum, due on demand	173,663	145,413
Convertible notes payable to related parties, interest at 12% per annum, due on March 7, 2015 (in default), convertible into common stock at $1.00 per share	55,000	55,000
Total Convertible Notes and Loans Payable - Related Parties	228,663	200,413
Related Parties | Curent
Less: Current Portion	(228,663)	(200,413)
Related Parties | Noncurent
Long-Term Convertible Notes and Loans Payable - Related Parties	$ 0	$ 0

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NOTE 5 - CONVERTIBLE PROMISSORY NOTES / RELATED AND NON-RELATED PARTIES: Schedule of promissory notes (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Accrued interest	$ 97,173	$ 34,639
Promissory Note
Debt Instrument, Face Amount	290,000	290,000
Debt Instrument, Unamortized Premium	0	0
Long-term Debt, Gross	290,000	290,000
Accrued interest	$ 89,723	$ 31,023

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NOTE 5 - CONVERTIBLE PROMISSORY NOTES / RELATED AND NON-RELATED PARTIES (Details) - USD ($)		9 Months Ended
	Sep. 24, 2018	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Dec. 31, 2018
Cash and cash equivalents		$ 580	$ 1,704	$ 163	$ 121,739
Inventory		80,404		80,404
Intangible assets		275,000		275,000
TOTAL ASSETS		355,984		$ 355,567
Amortization of Debt Discount (Premium)		0	17,812
Amortization to additional paid-in capital of premium on convertible note payable		0	$ 219,998
Warrant
Amortization of Debt Discount (Premium)		$ 67,292
Stock Issued During Period, Shares, New Issues		42,857
Extended Product Warranty Description		exercisable immediately at a fixed exercise price of $3.50 with an expiration date of September 24, 2023.
Warrants and Rights Outstanding		$ 86,750
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Method Used		Black Scholes Options Pricing Model
Share Price		$ 3.65
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Exercise Price		$ 3.50
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term		5 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate		3.87%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate		2.96%
Repayments of Convertible Debt		$ 10,000
Debt Conversion, Original Debt, Amount		$ 12,600
Debt Conversion, Converted Instrument, Shares Issued		30,000
Note 1
Debt Instrument, Face Amount	$ 300,000
Debt Instrument, Payment Terms	maturing on September 24, 2019, and a stated interest of 10% to a third-party investor.
Proceeds from Issuance of Debt	$ 276,250
Debt Instrument, Unamortized Discount	$ 23,750
Debt Instrument, Convertible, Associated Derivative Transactions, Description	the Company recorded a premium on the note of $299,998 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $1.825 per share (50% of the lowest trading price during the 25 days preceding the note's issuance), which computed to 164,383 shares of 'if-converted' common stock with a redemption value of $599,998 due to $3.65 per share fair market value of the Company's stock on the note's date of issuance

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NOTE 6 - NOTES PAYABLE: Schedule of note payable (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Total Notes Payable	$ 45,000	$ 40,000
Less: Current Portion	(45,000)	(40,000)
Long-Term Notes Payable	0	0
Series 1
Notes Payable	10,000	10,000
Series 2
Notes Payable	30,000	30,000
Series 3
Notes Payable	$ 5,000	$ 0

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NOTE 6 - NOTES PAYABLE (Details) - USD ($)		3 Months Ended		9 Months Ended
	Dec. 31, 2019	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Interest Expense		$ 25,701	$ 21,096	$ 81,882	$ 62,623
Series
Interest Expense	$ 4,800			3,616
Interest Payable, Current	$ 3,833	$ 7,450		$ 7,450

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NOTE 7 - COMMITMENTS AND CONTINGENCIES (Details) - Auctus	9 Months Ended
	Sep. 30, 2020 USD ($)
Long-term Debt, Gross	$ 490,767
Principle
Long-term Debt, Gross	300,000
Interest | Series 1
Long-term Debt, Gross	12,178
Interest | Series 2
Debt Related Commitment Fees and Debt Issuance Costs	$ 178,589

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NOTE 8 - EQUITY TRANSACTIONS (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Common Stock, Shares Authorized	140,000,000	140,000,000
Common Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Common Stock, Shares, Outstanding	7,361,005	7,361,005
Common Stock, Shares, Issued	7,361,005	7,361,005
Preferred Stock, Shares Authorized	20,000,000	20,000,000
Preferred Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Repayments of Notes Payable	$ 10,000
Note 2
Debt Conversion, Converted Instrument, Shares Issued	5,000
Preferred Stock
Stock Issued	$ 228
Gain (Loss) on Extinguishment of Debt	$ 9,772
Series D Preferred Stock
Preferred Stock, Shares Authorized	50,000	50,000
Preferred Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Preferred Stock, Shares Issued	5,000	5,000