Annual Report for Fiscal Year Ending 08-31, 2024 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled "Selected Financial Data" and our financial statements and related notes included elsewhere in this Registration Statement. Some of the information contained in this discussion and analysis or set forth elsewhere in this Registration Statement, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements." Our actual results may differ materially from those described below.

We define our accounting periods as follows: "Fiscal 2024" - September 1, 2023 through August 31, 2024.

This Management's Discussion and Analysis ("MD&A") reports on the operating results and financial condition of the Company for the years ended August 31, 2024 and 2023. The MD&A should be read in conjunction with the Company's financial statements for the year ended August 31, 2024 ("Annual Financial Statements").

The MD&A and Annual Financial Statements have been prepared in accordance with general accepted principles in the United States of America ("GAAP").

Company History and Summary

Nitches Inc is a diversified company that specializes in creating merchandise, manufacturing high end luxury brands, goods and collectibles for influencers and celebrities. Nitches is focused on sports clothing, athleisure brands, sustainable products, NFTs and technology. We are also taking tremendous steps to protect Nitches' and our clients' intellectual property by innovating technology to help prevent counterfeiting. In addition to the merchandise and manufacturing, Nitches is partnering with brands that are innovating outside of the box. Our business model is anchored in a long-term vision that builds on the heritage of our brands and stimulates creativity and excellence. Nitches empowers brands, celebrities and influencers with customized merchandise to increase their bottom line from their notoriety and social fame in this social age.

The Company was founded originally as a California corporation as a wholesale importer and distributor of clothing, home décor and tabletop products manufactured to our specifications and distributed in the United States under our brand labels and retailer-owned private labels. The Company moved jurisdiction to Nevada in 2008.

On November 5, 2020, International Ventures Society, LLC, a Nevada limited liability company, was appointed custodian of the Company pursuant to an Order of District Court of Clark County, Nevada. On November 6, the Company adopted amended Articles of Incorporation, which created the 2020 Series A Preferred Stock, with one share authorized. This one share effectively controls the Company by representing no less than 60% of all combined votes of Common and Preferred Stock at any time, and was issued to International Ventures Society LLC on the same day.

On December 16, 2020, International Ventures Society, LLC sold the one outstanding share of 2020 Series A Preferred Stock to Accelerate Global Market Solutions, Inc., a change of control transactions that resulted in John Morgan becoming CEO. This share of 2020 Series A Preferred Stock was converted into 100,000,000 shares of Common Stock on November 4, 2021, subsequently adjusted to 1,667 by the 1 for 60,000 reverse stock split effectuated on June 10, 2024. The share of 2020 Series A Preferred Stock was subsequently re-issued to John Morgan on January 23, 2023.

Since February 2022, the Company has announced the completion and launch of its Nitches OVS mobile app, which can be used to prove ownership of the Company's luxury products, apparel and streetwear clothing items, as well as clothing collections in collaboration with legendary football coach Steve Calhoun; superstar vocal coach Nick Cooper; vegan influencer John Lewis; and world-famous artist Voodoo Fe with a collection to honor the legendary Miles Davis. In addition, the Company has announced an NFT campaign to focus on inclusivity and the development of its own exclusive clothing line to promote mental well-being.

On April 5, 2022, the Company executed amended loan notes which, in each case, changed the conversion terms from $0.00001 per share to a 50% discount to the lowest market price experienced in the 20 trading days prior to conversion.

On July 21, 2022, the Company announced it had repaid all outstanding loan notes and convertible loan notes, leaving the Company completely debt-free. To the end of August 2022, the Company continued to work on development and promotion of its clothing ranges.

On November 25, 2022, the Company announced that it had ceased its involvement in the Metaverse project to focus on selling merchandise in the short term.

On March 22, 2023, the Company announced an expansion into the liquor industry with the launch of lifestyle of spirits, focused on the launch of an exclusive premium aged whiskey under the 'Tover' brand name. In furtherance of this expansion, the Company entered into a beverage brand developer agreement with Brenton Foster in March 2023.

On May 18, 2023, the Company announced two new initiatives: a collaboration with the Association of Luxury Suite Directors ('ALSD') as an exclusive vendor, providing premium staff clothing for the 2023 ALSD Conference and Tradeshow on July 9-11 at JW Marriott Indianapolis. Secondly, the Company is in talks with an unnamed Major League Baseball team to expand custom clothing options for their premium fans.

On January 23, 2024, the Company announced the appointment of Mr. Nikola Cvetkovic to its advisory board. Mr. Cvetkovic is renowned for his impactful work at Flaviar.com, where he played a key role in launching their online promotion campaign and distribution channels.

On February 6, 2024, the Company announced the establishment of an Overseas Representative Office in Asia and the appointment of a new advisory board member who will oversee the Asian business, seasoned business leader Li Kam Hung.

On February 28, 2024, the Company announced a partnership with Alamo Distillery to launch Tover Spirits, with product pre-sales starting within 45 days of this announcement as part of bringing the product to market.

Comparison of Year Ended August 31, 2024 to Year Ended August 31, 2023 (Restated)

Results of Operations

		Year ended August 31,										Percent
		2024				2023			Change			Change
						(Restated)
Revenues		$	4,830			$	4,224		$	606			14.3%
Gross loss			(146,744)				(17,130)			(129,614)			756.6%
Operating expenses			(485,592)				(426,198)			(59,394)			13.9%
Other expense			(2,211,041)				(1,266,990)			(944,051)			74.5%
Net loss		$	(2,843,377)			$	(1,710,318)		$	(1,133,059)			66.2%

Net revenues for the year ended August 31, 2024 were $4,830, as compared to $4,224 for the year ended August 31, 2023, due to a slight increase in sales through our Miles Davis clothing line.

Gross loss for the year ended August 31, 2024 was $(146,744), as compared to a loss of $(17,130) for the year ended August 31, 2023. The increased loss was caused by writing off the value of our inventory due to slow sales.

Total operating expenses were $485,592 for the year ended August 31, 2024, compared to $426,198 for the year ended August 31, 2023. The change is primarily derived from an increase in selling, general, and administrative expenses of $59,394 in 2024.

Other expense was $(2,211,041) for the year ended August 31, 2024 compared to $(1,266,990) for the year ended August 31, 2023. The $944,051 increase in expense was caused by increases in (i) loan interest, (ii) non-cash interest, (iii) amortization of debt discount, and (iv) loss on the revaluation of derivative liabilities.

For the year ended August 31, 2024, the Company reported a net loss of $(2,843,377) as compared to a net loss of $(1,710,318) for the year ended August 31, 2023.

Restatement of the Year Ending August 31, 2023

Certain of the Company's previously filed annual audited financial statements should no longer be relied upon and a restatement is required for these previously issued financial statements. The Company has restated herein the financial statements as of and for the year ended August 31, 2023, previously issued on December 7, 2023. The Company has also restated related amounts within the accompanying footnotes to the financial statements to conform to the corrected amounts in the financial statements.

The Company has evaluated and concluded that the misstatement was material to its previously issued financial statements.

Restatement Background

The Company determined several errors within the audited financial statements for the year ending August 31, 2023, including (1) presentational errors connected with convertible loans advanced to the Company with the related party loan amounting to $50,000 including debt discount $1,924 with the minor interest accrual offset; (2) the re-issuance of one share of Preferred Stock Series A to the CEO, which should have been accounted for at the value of the beneficial conversion feature embedded within the stock, resulting in an increase in costs for the year of $1,000,000; and (3) the miscalculation of derivative liabilities embedded within the convertible loan notes, resulting in an increase in costs of change in derivative liability of $303,440, an increase in interest accrual of $18,001, offset by $648 due to a presentational issue, and a decrease in derivative liability of $134,828; this affected a miscalculation of non-cash interest connected with the issuance of the related said convertible loan notes, which resulted in a reduction in costs of $420,268.

Description of Restatement Reconciliation Tables

In the following tables, the Company has presented a reconciliation of the previously issued balance sheets from prior periods as previously reported to the restated amounts as of August 31, 2023, as well as the previously issued statements of operations and statements of cash flows from the prior periods as previously reported to the restated amounts for the year ended August 31, 2023. The statement of stockholders' equity for the year ended August 31, 2023 has been restated for the correction to net loss.

		As at August 31, 2023
		Previously Reported			Restated Impacts			Restated Reference			As Restated
ASSETS
Current assets
Cash and cash equivalents		$	344		$	-					$	344
Deposits & prepayments			8,500			-						8,500
Inventory			135,030			-						135,030
Total current assets			143,874			-						143,874
Fixed assets
Property, plant & equipment			8,649			-						8,649
Accumulated depreciation			(3,599)			-						(3,599)
Software			11,900			-						11,900
Other intangible assets			21,000			-						21,000
Accumulated amortization			(3,220)			-						(3,220)
TOTAL ASSETS		$	178,604		$	-					$	178,604
LIABILITIES & STOCKHOLDERS' DEFICIT
Current liabilities
Accrued expenses		$	10,020		$	18,649			3(b)		$	28,669
Loans & notes payable, short-term or current			137,610			(48,596)			1(a)(b)			89,014
Related party loans and notes payable, short-term or current			3,036			48,076			1(a)			51,112
Derivative liability			384,524			(134,828)			3(a)			249,696
TOTAL LIABILITIES			535,190			(116,699)						418,491
STOCKHOLDERS' DEFICIT
Convertible preferred shares: par value $0.001, 10,000,000 authorized and 8,999,999 undesignated as at August 31, 2023 and 2022			-			-						-
Series A shares: 1 share designated Series A shares: 1 and nil shares issued and outstanding at August 31, 2023 and 2022, respectively			-			-						-
Series B shares: 1,000,000 shares designated Series B shares: Nil shares issued and outstanding at August 31, 2023 and 2022			-			-						-
Common stock: par value $0.001, 750,000,000 and 300,000,000 authorized and 5,729 and 946 issued and outstanding at August 31, 2023 and 2022, respectively			6			-						6
Additional paid-in capital			30,568,394			1,000,000						31,568,394
Accumulated deficit			(30,924,986)			(883,301)						(31,808,287)
TOTAL STOCKHOLDERS' DEFICIT			(356,586)			116,699						(239,887)
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT		$	178,604		$	-					$	178,604

		For the year ended August 31, 2023
		Previously Reported			Restated Impacts			Restated Reference			As Restated
Revenues		$	4,224		$	-					$	4,224
Cost of goods sold			21,354			-						21,354
Gross loss			(17,130)			-						(17,130)
Operating expenses
Selling, general & administrative expenses			420,811			128			1(b)			420,939
Depreciation & amortization			5,259			-						5,259
Total operating expenses			426,070			128						426,198
Net operating loss			(443,200)			(128)						(443,328)
Other income (expenses)
Bank charges			(1,555)			-						(1,555)
Bank/loan interest accrued			(18,649)			-						(18,649)
Non-cash interest, convertible loan			(457,801)			420,268			3(b)			(37,533)
Amortization of debt discount			(128,090)			-						(128,090)
Gain (loss) on revaluation of derivative liability			222,277			(303,440)			3(a)			(81,163)
Preferred stock and warrants issued for services			-			(1,000,000)						(1,000,000)
Total other income (expenses)			(383,818)			(883,172)						(1,266,990)
Net loss before income taxes		$	(827,018)		$	(883,300)					$	(1,710,318)
Provision for corporation taxes			-			-						-
Net loss		$	(827,018)		$	(883,300)					$	(1,710,318)
Net loss per share		$	(253.14)		$	(327.27)					$	(633.70)
Weighted average shares outstanding			3,267			2.699						2,699

		For the year ended August 31, 2023
		Previously Reported			Restated Impacts			Restated Reference			As Restated
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(827,018)		$	(883,300)					$	(1,710,318)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation and amortization			5,259			-						5,259
Stock issued for services			-			200,000						200,000
Amortization of debt discount			128,090			-						128,090
(Gain) loss on revaluation of derivative liability			(222,277)			303,440			3(a)			81,163
Non-cash interest, convertible loan			457,801			(420,268)			4(b)			37,533
Preferred stock and warrants issued for services			-			1,000,000						1,000,000
Changes in operating assets and liabilities:
Accounts payable and other current liabilities			(11,980)			68,649			1(b)			56,669
Inventory			(4,480)			-						(4,480)
Due to related party			-			(8,964)			1(a)4			(8,964)
Other current assets			(8,500)			-						(8,500)
NET CASH (USED IN) OPERATING ACTIVITIES			(483,105)			259,557						(223,548)
CASH FLOWS FROM INVESTING ACTIVITIES
Sale (purchase) of intangible assets			(24,500)			-						(24,500)
NET CASH PROVIDED BY INVESTING ACTIVITIES			(24,500)			-						(24,500)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of equity			287,000			(200,000)						87,000
Proceeds from (repayment of) debt instruments			158,521			(68,521)			1(a)4			90,000
Related party loans			(8,964)			8,964			1(a)4			-
NET CASH PROVIDED BY FINANCING ACTIVITIES			436,557			(259,557)						177,000
NET INCREASE (DECREASE) IN CASH			(71,048)			-						(71,048)
Cash, beginning of year			71,392			-						71,392
Cash, end of year		$	344		$	-					$	344
Supplemental schedules of non-cash investing and financing activities
Original debt discount		$	-		$	9,000					$	9,000
Initial debt discount and derivative liability created		$	-		$	140,000					$	140,000
Related party accrual reclassified into convertible loan		$	-		$	50,000					$	50,000
Conversion of debt to equity		$	-		$	-					$	-
Supplemental disclosure of cash flow information
Federal income taxes paid		$	-		$	-					$	-
Interest paid		$	-		$	-					$	-

Note 1. Relates to an error in presentation of the convertible promissory notes, whereby (a) one of the notes was from a related party and should have been presented as such, and (b) interest was miscalculated and included in the convertible loan note balance instead of in accrued expenses. While this has a presentational effect only on the balance sheet and cash flow statement, there is no effect on the income statement.

Note 2. Relates to an error arising from the re-issuance of the one outstanding share of preferred stock series A, whereby such re-issuance was originally at par, but should have been assigned a beneficial conversion feature valuation, which is $1,000,000. The net effect on the originally filed income statement is, therefore, an additional cost of $1,000,000. The net effect on the balance sheet is an increase in stockholders' deficit of $1,000,000 and an increase in additional paid-in capital of the same amount. There is no net effect on the cash flow statement.

Note 3. Relates to (a) a miscalculation of derivative liability. The revised liability at the year end is $249,696, a reduction of $134,828 from the original amount. The change for the income statement is from a gain of $222,277 to a loss of $81,163, a difference of $303,440. There is no net effect on the cash flow statement; and (b) a miscalculation of non-cash interest. The revised amount is a cost of $37,533 instead of $457,801, a difference of $420,268. There is no net effect on the cash flow statement.

Note 4. An issuance of stock for $200,000, including repayment of debt instruments of $$68,521 and related party loans of $8,964, was wrongly stated within Cash Flows from Financing Activities but should have been included in Cash Flows from Operating Activities, and has been corrected.

Note 5. Non-cash activities related disclosures in the Statement of Cash Flows which was missed in prior reporting and is now included.

Liquidity and Capital Resources

As of August 31, 2024, the Company had $59,991 in cash to fund its operations. The Company reported a working capital deficit of $(2,270,127) on August 31, 2024, as compared to $(274,617) at August 31, 2023, representing an increase in working capital deficit of $1,995,510.

The Company does not believe its current cash balance will be sufficient to allow the Company to fund its planned operating activities for the next twelve months. The ability of the Company to continue 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 or substantially curtail some of its planned activities. These conditions raise substantial doubt as to the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities should the Company be unable to continue as a going concern.

As the Company continues to incur losses, achieving profitability is dependent on achieving a level of revenues adequate to support the Company's cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional capital. Management intends to fund future operations through additional private or public equity offerings and may seek additional capital through arrangements with strategic partners from other sources. There can be no assurances, however, that additional funding will be available on terms acceptable to the Company, or at all. Any equity financing may be dilutive to existing shareholders.

Operating Activities

For the year ended August 31, 2024, net cash flow used by operating activities was $370,353, compared to $223,548 for the year ended August 31, 2023.

Investing Activities

For the year ended August 31, 2024, net cash flow used by investing activities was nil, compared to $24,500 for the year ended August 31, 2023.

Financing Activities

Net cash flows provided by financing activities for the year ended August 31, 2024, were $430,000, of which $11,000 was from sales of common stock shares and $419,000 in proceeds from borrowings, compared to $177,000 for the year ended August 31, 2023.

Liquidity and Capital Resource Measures

The Company's primary source of liquidity has been sales of equity and third party and related party convertible loans.

Going Concern

The Company has experienced a net loss and had an accumulated deficit of $34,651,664 as of August 31, 2024. The Company has a working capital deficit of $2,270,127 as at August 31, 2024.

These factors raise substantial doubt about the Company's ability to continue as a going concern, within one year from the issuance date of the financial statements. Management expects substantial additional expenses over the next several years as their commercial activities increase.

These financial statements for the year ending August 31, 2024 have been prepared assuming the Company will continue as a going concern, which is dependent upon the Company's ability to generate future profits and/or obtain necessary financing to meet its obligations as they come due.

The management has committed to an aggressive growth plan for the Company. The Company's future operations are dependent upon external funding and its ability to execute its business plan, realize sales and control expenses. Management believes that sufficient funding will be available from additional borrowings and private placements to meet its business objectives including anticipated cash needs for working capital, for a reasonable period of time. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the development of its business operations, or if obtained, upon terms favorable to the Company.

Transactions with Related Parties

Shares Issued to the CEO

In addition to an annual salary, the Company also compensates the CEO with shares, including the following issuances:

On March 9, 2023, the Company issued 3,333 shares of Common Stock to the CEO for services of $3, or $0.001 per share. These shares were issued at par value, which was $200,000 (note: this was prior to the reverse split of 1:60,000, meaning that 200,000,000 shares were originally issued), as they were subsequently cancelled..

On December 22, 2023, the Company cancelled 3,717 shares of Common Stock previously issued to the CEO, at par value.

On June 20, 2024, the Company issued 1,999,967 shares of Common Stock to the CEO at par value.

At August 31, 2024, the CEO held 2,000,001 shares of Common Stock and one share of Preferred Stock Series A.

Transactional Support Received from the CEO

The CEO, John Morgan, provides transactional and financial support for the Company on an informal basis by paying for certain items on behalf of the Company and being compensated subsequently.

As at August 31, 2024, the Company owed Mr. Morgan a total of $50,000, detailed in a formal convertible promissory note with no fixed schedule for repayment of this amount. Payment will be made when the Company has sufficient cash to do so.

Critical Accounting Policies

Refer to Note 2 in the Financial Statements for a summary of recently adopted and recently issued accounting standards and their related effects or anticipated effects on our results of operations and financial condition.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Inflation and Changing Prices

We do not believe that inflation or changing prices for the years ended August 31, 2024 and 2023 had a material effect on our operations.