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, 2021 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 have approximately 6,500 bottles of tequila valued at approximately $80,000. 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 current 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.





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 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 managers will also be responsible for collecting and reporting on all taxes, customs compliance and shipping regulations.

(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.


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(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.

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

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 six months ended June 30, 2022 compared to the three and six months ended June 30, 2021

For the three and six months ended June 30, 2022 and 2021, the Company had no revenue. For the three months ended June 30, 2022, the Company incurred $18,972 of professional fees compared to $26,278 for the three months ended June 30, 2021. For the six months ended June 30, 2022, the Company incurred $29,870 of professional fees compared to $35,291 for the six months ended June 30, 2021.

Such expenses consist primarily of legal and accounting fees, as well as annual fees required to maintain the Company's corporate status. For the three months ended June 30, 2022, the Company incurred $2,230 of selling, general and administrative expenses compared to $2,302 for the three months ended June 30, 2021. For the six months ended June 30, 2022, the Company incurred $4,297 of selling, general and administrative expenses compared to $4,156 for the six months ended June 30, 2021. For the three months ended June 30, 2022, the Company incurred $29,352 of interest expense on all notes payable compared to $26,293 for the three months ended June 30, 2021. For the six months ended June 30, 2022, the Company incurred $57,921 of interest expense on all notes payable compared to $52,014 for the six months ended June 30, 2021.

As a result of the foregoing, the Company incurred a loss of $50,554 and $54,873, respectively, for the three months ended June 30, 2022 and 2021 and a loss of $92,088 and $91,461, respectively, for the six months ended June 30, 2022 and 2021.





Liquidity

As of June 30, 2022, the Company had $297 of cash and negative working capital of $1,087,394. This compares with cash of $186 and negative working capital of $995,306 as of December 31, 2021.

For the six months ended June 30, 2022, the Company used cash of $27,239 in operations consisting of the loss of $92,088 and a decrease in accounts payable - related party of $2,000 which was offset by changes in accounts payable and accrued interest of $59,486 and changes in accrued interest due to related parties of $7,363. This compares with $21,810 used in operations for the six months ended June 30, 2021 consisting of the loss of $91,461 which was offset by changes in accounts payable and accrued interest of $58,270, changes in accounts payable - related party of $3,000, and changes in accrued interest due to related parties of $8,381.

There were no investing activities during the six months ended June 30, 2022 and 2021.

For the six months ended June 30, 2022, financing activities provided $27,350 which consisted of proceeds from notes payable of $20,000 and proceeds from loans payable to related parties of $7,350. For the six months ended June 30, 2021, financing activities provided $21,650 which consisted of proceeds from notes payable of $10,000 and proceeds from loans payable to related parties of $11,650.

As a result of the foregoing, there was a decrease in cash of $111 for the six months ended June 30, 2022 from the cash on hand as of December 31, 2021.

From the date of inception (October 18, 2005) to June 30, 2022, the Company has accumulated a deficit of $ 1,761,810, most of which were expenses relating to the initial development of the Company and maintaining reporting company status with the SEC. In order to survive as a going concern, the Company will require additional capital investments or borrowed funds to meet cash


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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 June 30, 2022, our remaining cash balance is not sufficient to cover our current liabilities, obligations and working capital needs for the balance of 2022. 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. 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 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.

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